BoG sees inflation rising into target band despite upside risks

The Bank of Ghana (BoG) has reiterated its expectation that inflation will rise into its medium-term target band of 8±2 percent, barring any significant shocks.

According to the Bank’s July 2026 Monetary Policy Report, the inflation outlook faces upside risks from upward revisions in utility tariffs, renewed geopolitical tensions in the Middle East and the potential impact of heavy rains on the domestic food supply chain.

Despite these risks, the central bank said the maintenance of an appropriate monetary policy stance, strong liquidity sterilisation efforts, ongoing fiscal consolidation and adequate reserve buffers are expected to mitigate inflationary pressures over the forecast horizon.

At its 131st Monetary Policy Committee (MPC) meeting, the Committee noted heightened risks in the global environment arising from escalating tensions in the Middle East.

The MPC, however, acknowledged the continued strengthening of domestic economic growth and improvements in the trade balance, which it said should support the accumulation of reserve buffers and enhance the economy’s resilience to heightened global uncertainty.

In arriving at its monetary policy decision, the Committee noted that the renewed Middle East conflict and the associated disruption of trade routes had reignited volatility in global energy markets.

These developments, the Bank said, could disrupt global supply chains, increase production and transportation costs and dampen global economic growth.

The central bank also observed that disinflation trends in several countries had stalled as energy prices rose sharply, prompting many central banks to pause their monetary policy easing cycles in response to renewed inflationary risks.

“Although global financing conditions remained relatively accommodative, the persistence of external shocks could result in tighter conditions, with adverse effects transmitted through the trade and financial channels of emerging market and developing economies,” the report said.

The Bank’s assessment comes as Ghana recorded a slight increase in headline inflation in August, ending a period of sustained disinflation.

Latest figures from the Ghana Statistical Service (GSS) show that year-on-year inflation rose to 5.0 percent in August 2026, from 4.6 percent in July.

The increase suggests that while inflation remains at historically low levels and within the Bank of Ghana’s target band, emerging domestic and external pressures could influence the pace of inflation over the coming months.

The central bank’s latest outlook indicates that developments in utility prices, food supply conditions, global energy markets and geopolitical tensions will remain critical factors shaping inflation expectations in the medium term.

Nonetheless, the BoG maintains that its current policy framework, supported by fiscal discipline, liquidity management and adequate foreign exchange buffers, should help cushion the economy against potential shocks and preserve price stability over the forecast period.