BoG Slashes Policy Rate to 21.5% as Producer Inflation Hits 22-Month Low

Ghana's economic landscape shows promising signs of stabilization this week as the central bank implements aggressive monetary easing, producer inflation reaches multi-year lows, and the government secures a major investment to boost energy production. These developments signal growing confidence in the nation's economic recovery trajectory.

Bank of Ghana Cuts Policy Rate by 350 Basis Points to 21.5%

The Monetary Policy Committee (MPC) of the Bank of Ghana has delivered its second major rate cut this year, reducing the benchmark policy rate by 350 basis points to 21.5%. This decisive move follows a 300 basis point reduction in July and reflects the central bank's confidence in the declining inflation trajectory.

Governor Dr. Johnson Asiama announced the majority decision after the 126th MPC meeting, citing "a steady decline in inflationary pressures" and "anticipated sound monetary policy reforms and ongoing fiscal consolidation efforts." The Committee projects that headline inflation will drop to within the medium-term target of 8 ± 2 percent by the end of the fourth quarter.

However, the Governor acknowledged potential risks from proposed utility tariff adjustments, noting that "maintenance of an appropriate monetary policy stance, strong sterilization efforts, ongoing fiscal consolidation, and adequate reserve buffers should sustain the disinflation process."

This aggressive easing cycle aims to stimulate credit growth and support economic recovery while balancing concerns about currency stability.

Producer Inflation Declines to 3.0%, Lowest Since November 2023

Ghana's Year-on-Year producer price inflation declined to 3.0% in August 2025, down from 3.6% in July, marking the seventh consecutive month of decline and the lowest reading since November 2023.

The breakdown by sector reveals:

• Manufacturing (35% weight): Eased significantly from 3.2% to 1.6%

• Mining and Quarrying (43.7% weight): Rose slightly from 4.6% to 4.9%

• Accommodation and food services: Continued negative inflation, dropping from -2.7% to -3.1%

The Ghana Statistical Service recommended that businesses take advantage of lower production costs to improve margins and reinvest in technology, while urging government to continue supporting industry through targeted tax reliefs and infrastructure investments. For households, the advice was to shop carefully and use this period to build savings.

Ghana Signs $1.5 Billion Deal with ENI and Vitol to Boost Oil and Gas Production

The government has secured a significant $1.5 billion memorandum of intent with energy giants ENI, Vitol, and the Ghana National Petroleum Corporation (GNPC) to enhance the nation's oil and gas production capacity.

The agreement, signed at the 2025 Africa Oil Week in Accra, represents a major vote of confidence in Ghana's upstream petroleum sector. President John Mahama welcomed the investment, highlighting the government's commitment to "creating a favorable business environment that meets investors while safeguarding our national interest."

Energy Minister John Jinapor described the deal as "a catalyst for the infrastructure that will power our nation forward," emphasizing its potential for job creation and energy sector growth.

Investor's Insight – MTN Ghana Shares Up 60.80% YTD

MTN Ghana shares continue their impressive performance, recording a 60.80% year-to-date gain and reaching GH¢4.02. This sustained growth demonstrates strong investor confidence in the telecommunications sector's resilience and growth potential amidst the evolving economic landscape.

The developments paint a picture of an economy in careful balance. The MPC's aggressive rate cutting cycle demonstrates confidence in the disinflation process, while the record-low producer inflation suggests underlying cost pressures are easing significantly. The substantial energy investment deal further reinforces Ghana's attractiveness to international investors.

However, the central bank's caution about potential utility tariff impacts highlights the delicate balancing act policymakers face. The continued strength of MTN Ghana shares suggests that equity investors are recognizing the improving macroeconomic fundamentals, particularly in sectors with strong growth prospects.

For the broader economy, these developments create a favourable environment for reduced borrowing costs, increased investment, and sustained recovery, provided that the proposed utility tariff adjustments are managed carefully to avoid derailing the disinflation process.

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