Inflation Eases to 8% in October: A sign of economic stability or a temporary relief?

GhanaWeb Feature by Sisl Prempeh

Ghana’s inflation rate fell to 8.0 percent in October 2025, representing a notable decline from 9.4 percent in September 2025.

According to latest figures from the Ghana Statistical Service (GSS) on Novermber 5, 2025, this marks the tenth consecutive monthly decline, representing a 1.4 percentage point drop. The trend signals relief for businesses and consumers grappling with high living costs and could boost market confidence.

The GSS described the decline as a sign of progress toward macroeconomic stability, attributing it to ongoing efforts to strengthen the cedi, supported by the Bank of Ghana’s recent monetary policy rate cut.

What does this mean for the economy and businesses?

The decline in inflation offers relief for consumers burdened by rising prices in key sectors such as food and transportation.

For businesses, the drop suggests stabilisation in operating conditions, easing cost pressures and improving profit margins, especially in retail and manufacturing.

However, some market watchers caution that continued sharp declines could indicate weakening consumer demand, potentially leading to reduced sales volumes.

For consumers, lower inflation must translate into a reduced cost of living and greater ease in managing household budgets. It also raises the likelihood of interest rate reductions, which would lower borrowing costs and stimulate capital investment.

What’s driving the decline in inflation?

Government Statistician, Dr Alhassan Iddrisu, attributed the decline to several factors, including exchange rate stability, reduced import costs, and improved food supply following a strong harvest season.

The cedi’s relative stability, supported by enhanced foreign exchange reserves and sustained investor confidence, has helped curb import-driven price increases. Fiscal consolidation efforts, including stricter expenditure controls and streamlined public spending, have also played a key role.

Also, stable energy prices and moderate adjustments in transport fares and food prices further contributed to the slowdown in the Consumer Price Index (CPI).

Impact on consumers and businesses

The latest figures bring much-needed relief after years of price hikes that eroded purchasing power. Consumers are experiencing slight improvements in affordability, particularly in essentials like food, clothing, and utilities.

For businesses, a lower inflation environment reduces cost uncertainties, enabling firms to plan operations, manage inputs, and forecast profits more accurately. Sectors such as manufacturing, retail, and construction are expected to benefit most, as disinflation often comes with cheaper credit, stable exchange rates, and renewed investor confidence.

Monetary policy outlook

The Bank of Ghana’s Monetary Policy Committee (MPC) recently reduced the policy rate to 21 percent in response to sustained disinflationary trends, a move that signals growing optimism about the country’s economic outlook.

A lower policy rate typically leads to reduced lending rates, which could ease borrowing costs for households and businesses, spurring investment and job creation.

However, experts warn that overly aggressive rate cuts could reignite inflation if global commodity prices rise or the cedi weakens.

Government’s next steps

The Ministry of Finance has reaffirmed its commitment to fiscal discipline under the IMF-supported programme, focusing on spending limits, improved revenue collection, and debt restructuring.

These measures, coupled with external support, have strengthened macroeconomic fundamentals and rebuilt investor confidence.

Despite lingering risks, Ghana’s disinflation marks one of its most encouraging economic achievements in recent years. If sustained, it could create a more predictable business environment, attract foreign investment, and improve credit ratings, all crucial for long-term resilience.

However, sustaining these gains will require policy consistency, stronger domestic production, and safeguards against external shocks.

As Ghana approaches the end of 2025, the challenge now remains for policymakers will be balancing growth and price stability, ensuring that the benefits of disinflation translate into real improvements in livelihoods.

SP/MA

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