Dr Asiama discusses central bank policy trade-offs at Kwahu Business Forum

The Governor of the Bank of Ghana, Dr Johnson Pandit Asiama, on Sunday, 5 April, participated in the Kwahu Business Forum Governor's Roundtable session to discuss Ghana's economic development and its impact on the business community.

During the session, Governor Asiama reflected on Ghana's economic progress in 2025 and highlighted the difficult policy decisions central banks face globally.

Touching on inflation, a key concern for the business community, Dr Asiama explained that the current low inflation rate had come at a significant cost to the central bank.

Highlighting the stable exchange rate and other strong macroeconomic indicators, he stated, "the Cedi is stable and under control."

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He emphasised the unique position of central banks and the trade-offs influencing their decisions, saying, "The work we do is always about trade-offs... trying to strike the right balance."

Dr Asiama explained that achieving the right balance between policies affecting growth and inflation is crucial.

He acknowledged the positive impact of Ghana's strong macroeconomic performance in 2025 but noted the associated costs to the central bank.

"Last year was good but expensive for the central bank. It took us a lot of money to mop up excess liquidity and bring inflation down to 5.4% by December 2025," the Governor said.

He further explained that the central bank’s monetary operations aimed to drain excess liquidity. While the cost was high in 2025, he expressed confidence that 2026 would be different.

"If you look at where inflation was at the end of December 2024 and where it is now, it wouldn't involve the same level of resources to keep it low and stable going forward," he noted.

Dr Asiama concluded by emphasising the importance of collaboration, assuring the business community that the central bank aims to strengthen the markets.

"When banks are strong, they can give more credit," he stated.

Central banks play a pivotal role in economic development, with a mandate to maintain stability by keeping inflation low and predictable. Achieving this balance is challenging because the tools used to mop up excess liquidity, such as BoG bills, come with significant costs and often impact the central bank’s balance sheet. Other monetary authorities, including the US Federal Reserve and the European Central Bank, face similar challenges.

In 2025, inflation dropped sharply from 23.8% at the end of December 2024 to 5.4% by December 2025. Reducing inflation by such a magnitude came at a high cost to the central bank.

At the last Monetary Policy Committee press briefing, Governor Asiama noted that the cost of Open Market Operations (OMOs) increased significantly in 2025 due to the liquidity mop-up exercise.

However, central banks cannot allow inflation to erode the real incomes of citizens, even at high operational costs. While nominal incomes may remain unchanged, every increase in inflation reduces purchasing power.

Looking ahead, Governor Asiama assured that the high OMO costs recorded in 2025 would not be repeated in 2026, owing to the current low and stable inflation environment. The data support this; in 2025, inflation was reduced by 18.4 percentage points, but with inflation now below 4%, maintaining price stability in 2026 will require significantly fewer resources.