Proceed cautiously with further policy rate cuts – IMF to BoG

The International Monetary Fund (IMF) has advised the Bank of Ghana (BoG) to exercise caution when considering additional policy rate cuts. The IMF highlighted potential secondary effects, including the impact of the Middle East conflict on energy and fertilizer prices, fiscal relaxation under the Policy Coordination Instrument, and the high exchange rate pass-through.

The IMF warned that easing monetary policy could move it from a neutral stance to an accommodative one, which would not be appropriate at this time. The BoG had already reached the end of a monetary easing cycle that began in July 2025, with the policy rate decreased by 400 basis points to 14% in March 2026, amounting to a cumulative reduction of 1,400 basis points since July 2025.

The BoG held its policy rate steady in May 2026. The IMF expects inflation to align with the BoG's 8±2% target by the end of 2026, with a real neutral rate around 5.0%. Consequently, the ex-ante real policy rate aligns with a neutral stance. Furthermore, the IMF noted that the BoG is currently implementing monetary policy reforms.

In December 2025, the BoG transitioned from 56-day bills to 14-day bills to improve liquidity management. This change led to a limitation in bill supply, reduced liquidity absorption, and increased reliance on the standing deposit facility, effectively loosening monetary conditions by about 350 basis points relative to the policy rate.

In June 2026, the IMF endorsed the IMF's recommendation, and the BoG unified the cash reserve ratio at 20%, terminating the previous tiered structure and requiring CRR fulfillment in cedis, rather than in the currency of deposits.