Economist Professor Godfred Bokpin has indicated that the Bank of Ghana’s policy rate no longer influences market behaviour, arguing that borrowing costs remain artificially high despite falling inflation.

Speaking on Joy FM’s Super Morning Show on March 19, Prof. Bokpin observed that headline inflation has dropped to just 3.3%, while the Bank of Ghana maintains a policy rate of 14%, a level he says is far removed from market realities.

“You cannot have inflation as low as 3.3% and have your policy rate at 14%. It has lost its signalling power in the market,” he said bluntly.

The economist explained that although a rate cut is widely expected, the more pressing issue is the central bank’s lag in responding to economic trends. He highlighted the unusual situation in which the Government of Ghana is borrowing short-term from the market at rates lower than the Bank’s own policy corridor.

“If the Central Bank believes that the economic turnaround evidenced by low inflation is systematic and predictable, their policy rate should have been in single digits by now,” Prof. Bokpin added.

Ghana’s headline inflation of 3.3% represents a steep decline from the hyperinflationary peaks of over 50% recorded in 2022 and 2023. The Bank of Ghana’s medium-term target for inflation ranges between 6% and 10%, indicating that current inflation is already below the lower bound.

Prof. Bokpin further noted that the Bank of Ghana itself acknowledged in a recent Monetary Policy Committee release that disinflation had proceeded faster than expected, reinforcing the disconnect between the policy rate and prevailing economic conditions.

The economist’s comments follow remarks by President John Mahama, who asserted that Ghana’s economy remains resilient enough to withstand shocks from the ongoing Israel–US–Iran conflict.

Prof. Bokpin emphasised that unless the Bank of Ghana adjusts its policy rate to align with current economic realities, distortions in credit pricing could persist, potentially slowing investment and broader economic activity.

Dr. Johnson Asiama, has sought to reassure stakeholders that the central bank’s recent 150-basis-point reduction in its policy rate to 14 percent will not threaten the country’s economic stability, even as tensions in the Middle East continue to affect global markets.

Speaking to the press after Wednesday’s Monetary Policy Committee (MPC) meeting, Dr. Asiama emphasised that the decision to lower the Monetary Policy Rate to 14% was grounded in Ghana’s improving macroeconomic fundamentals and does not endanger the nation’s growth trajectory.

“The adjustment of 150 basis points in our policy rate does not pose a risk to the economy,” Dr. Asiama said. “Our inflation trajectory remains sound, and our policy stance continues to support both price stability and sustainable growth regardless of disruptions originating from the Middle East.”

His reassurance comes amid international concern that the ongoing conflict in the Middle East has pushed up oil prices and created fresh uncertainty in global inflation, pressures that have complicated central bank decisions around the world.

Dr. Asiama noted that while external geopolitical shocks may impact trade and financial conditions, Ghana’s economy remains resilient.

“While we remain mindful of external risks, including those from distant conflict zones, the recent policy decision reflects a careful balance one that safeguards domestic stability while supporting economic activity.”

He further underscored that the Bank of Ghana will maintain close observation of international developments and adjust policy measures as needed to preserve economic stability.

“Our focus is on ensuring that the economy continues on a stable path. That requires both vigilance in the face of global uncertainties and confidence in the progress we have achieved,” the Governor added.

Meanwhile, the Ghana Union of Traders Association (GUTA) has voiced frustration over the sustained high interest rates charged by commercial banks, despite reductions in the central bank’s policy rate.

GUTA noted that lending rates between 22% and 24% are disproportionately high and do not reflect the current monetary stance of the Bank of Ghana.

During discussions with the Minority Caucus on Thursday, March 19, GUTA President Clement Boateng urged the central bank to enforce stricter measures to ensure banks lower their interest rates.

“Ghana’s banks continue to lend at double-digit rates. As the policy rate comes down, I expect the regulator to ensure commercial banks follow suit so that the business community and private sector can access affordable credit to expand their operations,” he said.

He further raised issues with the present VAT system, pointing out that commercial lending has not been responsive to policy rate adjustments.

“Just yesterday, the policy rate, which is 5%, was again reduced, yet lending rates remain around 14%. This situation is not ideal for businesses,” he added.