Collins Sefa The Bank of Ghana (BoG) has delivered another steep policy-rate reduction and reset its liquidity-management framework, responding to rapidly easing inflation and tightening real interest rates.
At its Monetary Policy Committee (MPC) meeting on Wednesday, November 26, the central bank cut the benchmark rate by 350 basis points to 18 percent, extending a cumulative 1,000bps easing cycle so far this year.
Governor Johnson Pandit Asiama said the committee agreed that the “prevailing high real interest rates provide scope to ease policy to further boost the growth recovery”, noting that inflation is now firmly within the medium-term target band.
Inflation drops to 8%; real interest rates climb
Headline inflation slowed to 8 percent in October—its lowest in more than four years—while short-term Treasury yields continue to sit in double digits, creating some of the highest real rates in recent memory.
Market analysts say the disinflation trend provided the MPC with ample room to accelerate easing while maintaining positive real returns on domestic instruments.
BoG resets liquidity operations
Paired with the rate cut was a major shift in BoG’s liquidity-management strategy.
The bank reinstated the 14-day bill as its primary open market operations (OMO) tool and discontinued the 56-day and 273-day instruments that have dominated liquidity absorption in recent years.
Dr. Asiama said the bank is returning to “the very shorter end of the market” as part of a broader reset of its OMO framework.
The change follows an aggressive sterilisation drive that has absorbed more than GH¢300 billion in excess liquidity since January—helping drive down inflation but also tightening liquidity for banks and adding pressure to government borrowing conditions.
Market reaction and yield movements
Market sentiment ahead of the decision had already priced in a significant cut.
“Investors had already positioned for a deep cut, with bids concentrated at the front end of the curve,” brokerage firm Constant Capital noted before the announcement. The firm expects steady trading as the market recalibrates short-term yields under the new policy structure.
At the most recent auction:
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91-day T-bill: 11.14%
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182-day T-bill: 12.68%
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364-day T-bill: 13.06%
Despite easing nominal yields, real returns remain elevated due to the speed of disinflation.
Growth remains resilient; cedi strengthens
Economic growth remains robust, expanding 6.3 percent in the first half of the year, led by strong performance in services and agriculture. The central bank’s Composite Index of Economic Activity recorded nearly 10 percent growth in September, signalling continued momentum.
The cedi has appreciated 32 percent against the US dollar this year, supported by improved FX inflows, refined market operations and a rise in international reserves, now at US$11.4 billion — around 4.8 months of import cover.
Analysts see cautious easing ahead
Despite favourable inflation dynamics, risks remain. Governor Asiama pointed to external uncertainties such as commodity-price volatility and geopolitical tensions, while domestic challenges include high taxes, utility tariffs and credit costs.
IC Securities’ Courage Kingsley Martey described underlying price pressures as “undeniably low”, citing core inflation measures between 5 percent and 7 percent. He expects the environment to support “continued but cautious easing”.
Governor Asiama said the MPC will continue to assess risks and adjust policy as needed, depending on inflation trends and the balance of domestic and external pressures.
