BoG Governor Defends 14% Policy Rate Hold, Tells Parliament It Was Needed to Shield Economic Gains

Bank of Ghana Governor Dr. Johnson Asiama has defended the Monetary Policy Committee's decision to keep the policy rate unchanged at 14% from May through September 2026, telling Parliament the hold was necessary to preserve hard-won economic stability amid mounting external headwinds and renewed domestic price pressures.

Appearing before the Parliamentary Committee on Economy and Development to brief lawmakers on monetary policy and macroeconomic developments in the first half of 2026, Dr. Asiama said the MPC's stance was vindicated by an economy that had posted strong growth, sharply lower inflation, and a robust external position—even as global oil prices and geopolitical tensions threatened to reverse those gains.

The Governor's appearance came as some market analysts had argued for a rate cut, pointing to declining inflation and improving macroeconomic conditions. The MPC, however, voted unanimously to hold at 14.0% at its May, July, and September meetings, citing external risks and concerns about rising inflation .

A Deliberate Pause After an Easing Cycle

The 14% rate represented a pause in what had been an aggressive easing cycle. The Bank of Ghana had cut rates five consecutive times before May 2026, as inflation tumbled from crisis-era highs. But the re-escalation of conflict in the Middle East in mid-2026 pushed energy prices higher and injected fresh uncertainty into the outlook, prompting the central bank to hold steady rather than continue loosening .

"The Committee's action is to preserve economic stability despite unfavourable external conditions," Dr. Asiama told the parliamentary committee, according to a statement. The Governor's defence underscored the delicate balance the central bank has had to strike between supporting growth and guarding against imported inflation in an economy still recovering from debt restructuring.

Growth and Disinflation Beat Targets

The Governor highlighted a macroeconomic picture that had outperformed expectations. Ghana's economy grew 6.4% year-on-year in the first quarter of 2026, accelerating from 5.8% in the prior quarter and marking the fastest pace in nearly a year . The services sector led with 7.1% growth, driven by a 25.2% surge in information and communication, while the industrial sector expanded 6.9% on the back of mining and quarrying .

Inflation told an even more striking story. Consumer price inflation fell to 3.2% in March 2026—the 15th consecutive monthly decline and the lowest rate in about three decades since the 2021 CPI rebasing . That placed inflation well below the central bank's 6–10% target band, a remarkable turnaround from the double-digit levels that had plagued Ghana during its economic crisis.

The Governor attributed the disinflation to exchange rate stabilisation following Ghana's debt restructuring, tighter fiscal and monetary policy, and normalisation of global commodity prices .

External Buffers Under Pressure but Resilient

Ghana's external position remained a bright spot, though not without strain. Dr. Asiama reported a trade surplus of US5.1 billion, supported by strong gold and cocoa export receipts . International reserves stood at US$12.94 billion, equivalent to 5.0 months of import cover.

Those reserves had come under pressure earlier in the year. The Governor had disclosed in August that Ghana lost approximately US14.16 billion in March to US$12.94 billion by June . The Bank of Ghana had intervened to support critical sectors of the economy during that period.

Despite the drawdown, Dr. Asiama said Ghana was better positioned to withstand external shocks than in previous episodes because reserves had been built up beforehand. He pointed to the Ghana Accelerated National Reserve Accumulation Programme (GANRAP), which targets 15 months of import cover by 2028—a significant increase from the current five months.

Banking Sector Strengthens

The Governor also reported substantial improvements in the banking sector. The average lending rate had dropped from 27% to 15.6%, while private sector credit grew 41.2%. Total banking sector assets rose 30.7% to GH¢502.4 billion. The Capital Adequacy Ratio stood at 20.4%, comfortably above regulatory minimums, and Non-Performing Loans declined to 16.1% from 23.1%—a sign that asset quality was recovering as the economy stabilised.

Dr. Asiama outlined key reforms undertaken by the central bank, including a uniform cash reserve ratio of 20% effective June 2026 , a transparent and rules-based foreign exchange intervention framework, and GANRAP.

The Governor concluded by reaffirming the Bank of Ghana's commitment to price stability, transparency, and accountability to Parliament and the Ghanaian people. His appearance before the parliamentary committee formed part of the central bank's broader effort to deepen engagement with lawmakers as Ghana navigates a delicate phase of recovery—one in which the gains of disinflation and growth remain vulnerable to forces beyond its borders.