Business News of 2026-09-24
BoG faces rate decision as oil prices rise and cedi weakens
The Bank of Ghana faces a more difficult policy rate decision this week as rising global oil prices, renewed pressure on the cedi and tighter international financial conditions threaten to weaken the country’s recent gains in inflation and exchange-rate stability.
The Monetary Policy Committee will have to balance these emerging risks against inflation of 5.0 percent, strong foreign-exchange reserves, improved fiscal conditions and growing demand from businesses for further reductions in borrowing costs when it meets on September 23 and 24.
With the policy rate at 14 percent—nine percentage points above headline inflation—the central bank has room to continue easing. However, August’s increase in inflation, oil prices above US$100 per barrel and fresh pressure on the local currency could strengthen the case for keeping the rate unchanged.
Inflation remains well below the central bank’s medium-term target band of 6 percent to 10 percent, giving the MPC considerable room to reduce the policy rate in real terms. At 14 percent, the policy rate is nine percentage points above the August inflation rate.
The latest inflation reading has weakened the case for an immediate cut. Headline inflation increased from 4.6 percent in July to 5.0 percent in August, raising questions about whether the downward inflation cycle has reached its limit.
The increase was small, but the components likely to attract the MPC’s attention moved in the wrong direction. Inflation for locally produced items increased from 5.9 percent to 6.1 percent, while inflation for imported products rose from 2.0 percent to 2.2 percent. Food inflation eased marginally from 3.1 percent to 3.0 percent, but the rise in local and imported inflation points to underlying price pressures beyond food.
Those pressures could strengthen after international crude oil prices moved above US$100 per barrel following renewed supply concerns in the Middle East. Brent crude was trading at about US$104.60 per barrel on September 18, with West Texas Intermediate above US$102.
The increase could raise the cost of imported petroleum products, transport, electricity generation and the movement of food and other goods across the country. Businesses which rely on fuel, imported machinery and petroleum-based inputs could also face higher operating costs.
Ghana exports crude oil, meaning higher prices could improve petroleum export receipts and government revenue. However, the country continues to import a substantial proportion of the refined petroleum products consumed locally. The inflationary effect will therefore depend on whether additional crude-export earnings are sufficient to offset the higher foreign-exchange cost of imported fuel.
Bulk oil importers will require more dollars to finance the same quantity of petroleum products if international prices remain above US$100 per barrel. This could intensify demand in the foreign-exchange market and place additional pressure on the cedi.
The local currency ended August at about GH¢11.25 to the US dollar, strengthening from GH¢11.69 at the end of July. The Bank of Ghana’s September 18 exchange-rate update, based on transactions at the close of business on September 17, showed the interbank mid-rate weakening to GH¢11.52 to the dollar. This represents a depreciation of about 2.4 percent from the end-August level.
Although the movement remains limited, the direction of the exchange rate will be critical to the MPC’s decision. Cedi stability has played a major role in bringing inflation down by reducing the local cost of imported fuel, food, medicines, machinery and production inputs.
A prolonged weakening of the currency, combined with oil prices above US$100, could quickly reverse part of the imported-inflation relief experienced over the past year. The MPC may therefore prefer to keep the policy rate unchanged until it can determine whether the latest exchange-rate pressure is temporary or the start of a more sustained adjustment.
The international interest-rate environment also argues for caution. The United States Federal Reserve raised its benchmark rate by 25 basis points on September 17, increasing returns on dollar-denominated assets and strengthening the attraction of the dollar.
A wider gap between returns on cedi and dollar assets could reduce demand for domestic securities, increase the premium investors require to hold cedi assets and intensify foreign-exchange pressure. A Bank of Ghana rate reduction immediately after the US increase would widen this risk unless investors remain confident in Ghana’s inflation, reserves and fiscal position.
The central bank nevertheless enters the meeting with considerably stronger external buffers. Gross international reserves stood at about US$12.9 billion in June 2026, providing approximately five months of import cover.
Gold exports, the country’s trade surplus and the Bank of Ghana’s reserve-accumulation programme have strengthened the foreign-exchange position. Gold export earnings reached approximately US$20.2 billion in 2025 and accounted for about 63 percent of total merchandise exports, giving the central bank an important source of foreign-exchange support.
Higher gold prices linked to global geopolitical uncertainty could further strengthen export receipts and partially offset the pressure created by the oil shock. The MPC will therefore consider not only the rise in Ghana’s petroleum import bill but also the extent to which gold and crude-export earnings can protect the balance of payments.
The Bank of Ghana’s new foreign-exchange intervention framework provides another line of defence. The framework separates interventions intended to control excessive exchange-rate volatility from operations for reserve accumulation and foreign-exchange intermediation.
Its effectiveness will be tested if energy-sector dollar demand increases during the final quarter. Heavy intervention could stabilizethe cedi but slow reserve accumulation, while limited intervention could allow external pressures to feed more quickly into domestic prices.
Fiscal policy will also influence the decision. Government recorded a primary surplus of about 0.6 percent of gross domestic product during the first half of 2026, while cash expenditure of GH¢136.9 billion remained below the programmed GH¢172.5billion.
Revenue and grants reached GH¢124.8 billion against a target of GH¢126.1billion. Capital expenditure, however, fell to GH¢21.7billion from the programmed GH¢36.6 billion, representing a shortfall of about 41 percent.
The primary surplus and restrained expenditure reduce the danger of fiscal operations adding excessively to inflation and domestic liquidity. This supports the case for monetary easing. But weak capital spending could also slow infrastructure activity and economic growth, strengthening calls for lower borrowing costs to support private investment.
Domestic credit conditions present the MPC with another difficult balance. Private-sector credit increased by 41.2 percent year-on-year to GH¢119.64 billion in June 2026, showing banks are returning strongly to lending as yields on government securities decline.
The Ghana Reference Rate dropped to 10.18 percent in September from 23.80 percent a year earlier. Average bank lending rates have also fallen from about 27 percent to approximately 15 percent, while some highly rated borrowers are reportedly obtaining facilities at between 11 percent and 12.5 percent.
These reductions show earlier monetary easing is already passing through to parts of the credit market. Another policy-rate cut could reinforce the trend and improve access to working capital and investment financing for businesses.
Strong credit growth may reduce the urgency for further easing. A 41.2 percent increase in private-sector credit, particularly if it continues to exceed growth in economic activity, could eventually add to demand, imports and foreign-exchange pressure.
It could also expose banks to new asset-quality risks. The banking industry’s non-performing loan ratio declined to 16.1 percent in June 2026 from 23.1 percent a year earlier, but it remains above the Bank of Ghana’s target of no more than 10 percent by December.
The MPC will examine whether the improvement reflects genuine loan recoveries and stronger borrower performance or mainly write-offs, restructurings and rapid growth in the overall loan book. Cutting rates too quickly while banks expand credit could weaken underwriting standards and create a new stock of troubled loans.
The decision is consequently no longer determined by low headline inflation alone. The MPC must decide whether the August increase in inflation, weaker cedi, oil-price surge and higher US interest rates represent temporary shocks which Ghana’s reserves and export earnings can absorb.
Holding the policy rate at 14 percent would allow the central bank to assess the impact from global oil prices to domestic fuel, transport and food costs while protecting the cedi from a widening interest-rate gap.
But a further reduction would signal confidence in the durability of Ghana’s disinflation, fiscal consolidation, reserve strength and external-sector performance. It would also provide additional support to businesses seeking cheaper credit.
