The research department of the Bank of Ghana is intensifying its data gathering and modelling exercises ahead of next week’s Monetary Policy Committee meeting, with analysts expecting the central bank to pause its aggressive monetary easing cycle in response to renewed inflationary risks and heightened global geopolitical uncertainty.
The MPC is scheduled to meet from May 18 to May 20 to review domestic and external macroeconomic conditions and decide on the benchmark Monetary Policy Rate that will guide interest rates in the economy over the subsequent two months.
The meeting comes at a delicate point for Ghana’s economy. While inflation has fallen sharply over the past 15 months and economic growth has strengthened, policymakers are now confronting the first signs that the disinflation trend may be losing momentum.
Data released by the Ghana Statistical Service last week showed that headline inflation rose to 3.4 percent in April 2026 from 3.2 percent in March, marking the first increase since December 2024. Although the increase was marginal, economists say it has complicated expectations that the central bank would continue with the steep rate cuts that began in the second half of 2025.
The Bank of Ghana cut the policy rate by a cumulative 1,400 basis points between July 2025 and March 2026, bringing the benchmark rate down to 14% as inflation eased rapidly, the cedi appreciated strongly and fiscal conditions improved.
However, officials familiar with the MPC’s preparatory process say the Bank’s research department is now placing greater emphasis on forward-looking inflation risks rather than current inflation alone.
Particular attention is being paid to developments in global energy markets amid continuing military and geopolitical tensions in the Persian Gulf and the failure so far to secure a negotiated settlement capable of restoring stability to oil shipping routes and energy supply chains.
The conflict has driven intermittent spikes in crude oil prices and heightened concerns about imported inflation for (net) oil-importing economies such as Ghana.
Bank of Ghana Governor Dr. Johnson Asiama recently warned that escalating Middle East tensions could threaten Ghana’s improving inflation outlook, especially if higher fuel and transport costs begin feeding into domestic prices.
Central bank officials are also monitoring the potential secondary effects of higher global oil prices on transport fares, food distribution costs and utility tariffs.
“These are not yet alarming pressures, but they are risks that monetary policy cannot ignore,” a senior banking sector analyst in Accra told Business Post at the weekend.
The MPC’s internal assessment is also expected to focus heavily on inflation expectations among consumers, businesses and financial market participants.
During its previous meeting in March, the MPC noted that inflation expectations remained broadly anchored despite earlier external shocks, allowing the central bank to continue loosening monetary conditions.
The committee also pointed then to improving business and consumer confidence, rapid moderation in money supply growth, easing treasury bill yields and stronger private sector credit growth as evidence that macroeconomic conditions were stabilising.
Indeed, the March MPC communiqué highlighted several encouraging trends. Economic activity was strengthening, banking sector indicators had improved considerably and the fiscal deficit had narrowed sharply because of tighter expenditure controls.
The central bank also noted that Ghana’s public debt-to-GDP ratio had declined significantly by the end of 2025 while the banking sector’s non-performing loan ratio was gradually easing.
Those positive indicators are still expected to weigh in favour of maintaining a supportive monetary stance.
Nevertheless, economists say the April inflation uptick and external uncertainties are likely to make the MPC more cautious.
Fitch Ratings recently projected that the Bank of Ghana would “remain prudent and pause its easing cycle to prevent inflation risks from materialising” after the sharp rate reductions already implemented.
Analysts at several local investment firms have expressed similar views, arguing that although inflation remains comfortably below the central bank’s medium-term target band of between 6 percent and 10 percent, the pace of disinflation is likely to slow over the coming months as favourable statistical base effects begin fading.
“There is now a stronger argument for caution than for another aggressive cut,” one Accra-based monetary policy economist asserted last week. “The Bank of Ghana has already delivered significant easing, and policymakers will want to assess the lagged effects before taking rates materially lower again.”
Financial markets are increasingly pricing in a hold decision at next week’s meeting, with only a minority of analysts expecting another small reduction.
Some economists believe the MPC could still opt for a symbolic cut of between 50 and 100 basis points if incoming data before the meeting show that underlying inflation pressures remain weak and exchange rate stability is sustained.
However, most analysts expect the committee to leave the Monetary Policy Rate unchanged at 14 percent while signalling readiness to respond quickly should inflationary pressures intensify.
That approach, analysts say, would allow the central bank to balance competing objectives: supporting economic recovery while preserving the credibility of Ghana’s inflation targeting framework.
The Bank of Ghana has spent much of the past year rebuilding confidence in monetary policy after the severe macroeconomic instability experienced during the 2022 to 2024 period.
Since then, a combination of fiscal consolidation, exchange rate stability, tighter monetary conditions and improved food supply conditions has helped drive inflation sharply lower and restore investor confidence.
The challenge for policymakers now is ensuring that renewed external shocks do not reverse those gains.
Beyond the immediate policy rate decision, investors and businesses will also pay close attention to the MPC’s accompanying statement for clues about the future direction of interest rates.
Corporate treasurers, commercial banks and portfolio investors are particularly eager to know whether the central bank still sees room for further easing later in the year or whether the recent inflation increase marks the start of a more prolonged pause.
For now, however, the consensus among economists appears to favour caution.
By: Toma Imirhe / businesspostonline
