Proceed cautiously with further policy rate cuts – IMF to BoG

The International Monetary Fund (IMF) has advised the Bank of Ghana (BoG) to take care when considering further reductions in policy rates. The IMF highlights potential secondary effects from the ongoing war in the Middle East, which is influencing energy and fertilizer prices. Furthermore, the fiscal easing under the Policy Coordination Instrument and the high exchange rate pass-through present persistent risks.

The IMF warns that easing monetary policy could shift it from a neutral stance to being too accommodating, which might not be justified. The Fund also points out that the BoG is nearing the conclusion of a monetary easing cycle, as the policy stance became neutral in March 2026. In March of that year, the BoG's Monetary Policy Committee (MPC) cut the policy rate by 400 basis points to 14%, resulting in cumulative cuts of 1,400 basis points since July 2025.

The MPC maintained the policy rate at 14% in May 2026. The IMF expects inflation to align with the BoG's 8±2% target by the end of 2026, with the estimated real neutral rate around 5.0%. Consequently, the ex-ante real policy rate aligns with a neutral stance. The IMF also notes that the BoG is modernizing its monetary policy operations, having replaced its 56-day bills with 14-day bills in December 2025 to enhance liquidity management.

This shift has led to limited bill supply, increasing the use of the standing deposit facility and lowering rates towards the bottom of the interest rate corridor, effectively loosening monetary conditions by approximately 350 basis points relative to the policy rate. The IMF is in agreement with the BoG's advice, and in June 2026, the BoG standardized the cash reserve ratio (CRR) at 20%, replacing the previous tiered structure.

Additionally, the BoG mandated that CRR must be fulfilled in cedis instead of the currency of deposits, resulting in a modest increase in unremunerated liquidity absorption through the CRR.