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Bank of Ghana Expected to Tighten Monetary Policy in First Half of 2026

Accra, Ghana – Following a significant reduction in the benchmark interest rate in late 2025, the Bank of Ghana (BoG) is predicted to adopt a more conservative stance, effectively tightening monetary coverage in the first half of 2026. This strategic shift is driven by the need to mitigate potential inflationary risks stemming from recent tariff adjustments.

Introduction

The monetary landscape of Ghana is poised for a pivotal shift. As the year 2025 concludes with a aggressive monetary easing cycle, economic forecasts suggest a “pause and hold” strategy for the first six months of the coming year. Leading investment firm IC Securities has projected that the Monetary Policy Committee (MPC) will maintain a double-digit real policy rate throughout the first half of 2026.

This article analyzes the Bank of Ghana’s recent policy moves, the economic rationale behind the anticipated tightening, and what this means for the broader Ghanaian economy. We will explore the mechanics of the real policy rate, the impact of tariff hikes on inflation, and practical implications for businesses and investors.

Key Points

Background

To understand the forecast for 2026, it is essential to analyze the events of late 2025. At its final meeting for the year in November 2025, the Monetary Policy Committee of the Bank of Ghana made a bold move. The committee voted by a majority decision to slash the policy rate by 350 basis points, bringing it down to 18.0%.

The Mechanics of the Rate Cut

The nominal policy rate is the anchor for interest rates in the economy. A cut of this magnitude (350 basis points) signaled a strong intent to stimulate economic growth by lowering the cost of borrowing. However, IC Securities noted that while the cut was deep, it was also cautious. The firm observed that the cut was actually 50 basis points lower than their maximum expectation of 400 basis points.

This “cautious” approach suggests that the MPC is walking a tightrope—wanting to support growth while remaining vigilant against inflation.

Understanding the Real Policy Rate

For the average observer, the nominal rate (18.0%) is the headline figure. However, economists look at the Real Policy Rate. This is calculated by subtracting the inflation rate from the nominal policy rate.

Before the November 2025 meeting, the real policy rate was approximately 13.5%. After the cut, despite the lower nominal rate, the real policy rate dropped to 10.0%. This indicates that even with the rate cut, the cost of money remains significantly above the rate of inflation, which defines a “restrictive” monetary stance.

Analysis

The projection for the first half of 2026 hinges on the interplay between monetary policy and external price shocks, specifically utility tariffs.

The Threat of Second-Round Effects

Inflation is rarely static. When the government approves increases in tariffs (such as electricity and water rates), these costs feed directly into the production expenses of businesses. If businesses pass these costs onto consumers in the form of higher prices, this is known as the “second-round effect.”

IC Securities argues that the government and the BoG will seek to avert this. If the economy is allowed to run too “hot” (with low interest rates) while tariffs are rising, inflation could spiral. By keeping the real policy rate in the double digits, the BoG effectively reduces the money supply and cools demand, helping to stabilize prices despite the tariff hikes.

Alignment with the 2026 Budget

The anticipated tightening aligns with the fiscal stance outlined in the 2026 government budget. The budget remarks explicitly state that “monetary easing will be cautious and conditional on continued stability.”

This creates a coordinated fiscal and monetary front. While the government may be spending to stimulate the economy (fiscal expansion), the central bank will keep interest rates relatively high (monetary restraint) to ensure that such spending does not lead to runaway inflation.

Interpreting the “Pause”

The term “pause” in this context does not necessarily mean an immediate hike in rates. Rather, it signifies a halt in the *cutting* cycle that began in July 2025. The MPC is likely to hold the MPR at 18.0% for several months to assess how the economy absorbs the previous cuts and how inflation reacts to the tariff hikes.

Practical Advice

How does this macroeconomic outlook affect different stakeholders in the Ghanaian economy?

For Businesses and Investors

• Cost of Capital: Expect borrowing costs to stabilize rather than drop further in the first half of 2026. Businesses should plan their capital expenditures based on current interest rates rather than expecting cheaper credit immediately.
• Pricing Strategy: With the BoG signaling vigilance against inflation, businesses should be cautious about speculative price increases. The environment favors efficiency and cost-cutting over price hikes to maintain margins.

For Individuals

• Savings: A double-digit real policy rate is generally good for savers. It suggests that the interest earned on deposits will likely outpace the erosion of purchasing power (inflation), preserving the value of savings.
• Loans: If you are looking to take out personal loans or mortgages, the window for significantly lower interest rates may have closed for the short term. It is advisable to lock in fixed rates if possible.

FAQ

Conclusion

The Bank of Ghana is navigating a delicate economic transition. After aggressively cutting rates in the second half of 2025 to spur growth, the central bank is now shifting its focus to protection against inflationary shocks in 2026. The consensus view from market analysts like IC Securities is that the first half of 2026 will be a period of consolidation rather than further easing.

By maintaining a double-digit real policy rate, the BoG is signaling its commitment to long-term stability. For the Ghanaian public and business community, this translates to a predictable but restrictive financial environment where vigilance against inflation remains the top priority.