2 Economists endorse BoG’s 14% rate cut • Urge coordinated monetary, fiscal action amid global risks
Two economists have endorsed the Bank of Ghana (BoG)’s decision to cut its policy rate by 150 basis points to 14 per cent, describing it as a necessary step to align monetary policy with current economic conditions amid the geopolitical tensions in the Middle East.
The economists, both from the University of Ghana (UG), explained that the decision to drop the policy rate was appropriate given current macroeconomic conditions, including six per cent Gross Domestic Product (GDP) growth in 2025, improved reserves and a stable cedi.
The economists are Professor of Finance at the University of Ghana Business School, Godfred Bokpin, and an Associate Professor of Development Economics at the Institute of Statistical, Social and Economic Research, Richmond Atta-Ankomah.
The experts, who spoke to the Graphic Business in separate interviews, stressed that in an ideal situation, inflation and the policy rate should have a margin of about five percentage points to ensure effective monetary policy transmission and stability, as seen in countries such as Kenya and Rwanda that operated similar inflation-targeting frameworks.
However, the economists maintained that, should oil prices continue to escalate amid global tensions, the immediate-term response should not be a rise in the policy rate but rather other open market operations and complementary fiscal measures to help contain inflationary pressures and stabilise the economy.
Professors Bokpin and Atta-Ankomah also converged on the point that it should not be only the monetary side that must be deployed to manage economic shocks, but also the fiscal side working in coordination to stabilise the economy.
Context
The BoG’s decision to reduce its policy rate to 14 per cent after its 129th Monetary Policy Committee (MPC) meeting reflects an effort to respond to current economic conditions.
Inflation dropped sharply to 3.3 per cent in February 2026, significantly below the central bank’s medium-term target range of 6 to 10 per cent.
The decline in goods market prices was supported by tight monetary policy, fiscal restraint and improved food supply conditions.
The cut in policy rate, therefore, aims to stimulate economic activity while maintaining price stability amid ongoing domestic and global uncertainties.
Appropriate cut
Prof. Bokpin explained that the central bank’s policy rate had lagged behind market developments, weakening its effectiveness as a signalling tool.
“If you see where even the Ghana reference rate is, core inflation and expected inflation in the next few months, the policy rate seemed out of sync with market trends,” he said.
The finance professor added that the previous MPC had acknowledged that disinflation had occurred faster than anticipated.
Coordinated fiscal measures
Prof. Bokpin stressed that under normal circumstances, the rate cut could have been larger than 150 basis points, but global geopolitical tensions and their impact on energy prices necessitated a cautious approach.
He said the 3.3 per cent inflation was unusually low for a developing economy and could have adverse effects on savings, investment and capital formation.
“Inflation at 3.3 per cent is too low for a developing country like Ghana. We expect it to rise slightly in the coming months to stimulate consumption, savings and investment,” Prof. Bokpin said.
On the pace of transmission to lending rates, he explained that improvements would take time, partly due to non-performing loans in the banking sector.
He added that monetary policy alone could not shield the economy from shocks, but rather coordinated fiscal measures such as strategic government spending, temporary tax reliefs, adjustments to import duties, and targeted interventions in key sectors to manage inflationary pressures, support investment and strengthen the economy’s resilience amid global uncertainties.
Caution amid global shocks
For his part, Prof. Atta-Ankomah described the new policy rate as “appropriate at this point,” explaining that previous reductions were much larger.
“In November 2025, the rate was 18 per cent and was later reduced to 15.5 per cent, a drop of about 350 basis points. This time, the 150 basis points reflect a cautious approach,” he said.
The development economist said lowering the policy rate was intended to encourage commercial banks to reduce lending rates, thereby increasing credit availability for households and businesses, which in turn could stimulate demand for goods and services.
Prof. Atta-Ankomah, however, cautioned the central bank to be careful amid ongoing international shocks, including the Israel-US-Iran conflict and the recent ban on tomato exports from Burkina Faso, which could exert upward pressure on inflation.
Strategic policy measures
Prof. Atta-Ankomah underlined the importance of maintaining reserves and policy credibility to cushion the economy against external shocks.
On the broader impact of the policy, he observed that currency appreciation, while beneficial for imports and consumers, could undermine local industries and long-term job creation.
“For every import, in the end, you export jobs instead of goods,” he said.
He added that there was a need for strategic, well-calibrated policy interventions to help safeguard macroeconomic stability, support local industries and ensure that growth translates into sustainable job creation and investment opportunities.