Inflation still high at 23% as Bank of Ghana seeks stronger policy response

The Governor of the Bank of Ghana, Dr. Johnson Asiama, has acknowledged a decline in the country’s inflation rate but warned that it remains high at over 23%.

Speaking at the 123rd Monetary Policy Committee (MPC) meeting, he emphasized that inflation control remains a top priority due to its impact on the cost of living, business planning, and economic stability.

Despite some progress, structural challenges continue to fuel inflation. Food price inflation remains high due to supply chain disruptions and underinvestment in agriculture. External factors, including geopolitical tensions and weakening Chinese demand, could also affect inflation by disrupting trade flows and exchange rate stability. Dr. Asiama cautioned that inflationary pressures could persist unless both monetary and structural policy measures are reinforced.

On the domestic front, fiscal policy has significantly influenced inflation trends. The expansionary fiscal stance in 2024 resulted in a budget deficit exceeding program targets, putting upward pressure on prices. While early signs of fiscal consolidation in 2025 are promising, the Governor stressed that stricter spending controls and improved revenue mobilization are necessary to support inflation-fighting efforts. He also noted that upcoming IMF program reviews would test the government’s commitment to fiscal discipline.

Dr. Asiama highlighted concerns about rising liquidity levels in the banking sector, which could drive inflation if excess liquidity fuels demand for foreign exchange and consumer goods. Commercial banks have also raised concerns about the Cash Reserve Ratio (CRR) framework, which affects credit availability. While private sector credit is recovering in nominal terms, real credit growth remains weak, limiting investment and productivity gains that could help stabilize prices.

Reflecting on past policy missteps, Dr. Asiama acknowledged that weak coordination between monetary and fiscal policies had contributed to inflationary pressures. Loose fiscal policy during economic downturns, combined with delays in structural reforms, undermined monetary policy effectiveness. He urged the MPC to adopt a long-term approach, strengthen policy frameworks, and improve transparency in decision-making to anchor inflation expectations.

Beyond immediate inflation concerns, he pointed to deeper structural issues affecting price stability, including exchange rate misalignments, underdeveloped financial markets, and weak agricultural investment. While monetary policy alone cannot resolve these challenges, he called for coordinated efforts among government agencies and financial institutions to address the root causes of inflation and strengthen economic resilience.

Despite these challenges, Dr. Asiama expressed confidence in Ghana’s ability to manage inflation. He cited strong foreign reserves, an improving trade surplus, and the credibility of the central bank’s policy framework as key buffers against external shocks. However, he cautioned that maintaining these strengths would require disciplined policy decisions and a commitment to sound macroeconomic management.

Concluding his remarks, Dr. Asiama reaffirmed the MPC’s commitment to reinforcing the disinflation path while ensuring policies do not stifle economic recovery. He called for rigorous, evidence-based discussions to determine the best course for interest rates and monetary policy adjustments. With that, he officially opened the 123rd MPC meeting, setting the stage for critical decisions on Ghana’s inflation outlook and overall economic stability.