The Governor of the Bank of Ghana, Dr. Johnson Asiama, has called on commercial banks to exercise caution in adjusting their lending rates in response to the recent hike in the policy rate.

He emphasized the importance of maintaining clear and open communication with customers during this process.

Dr. Asiama conveyed this message during a meeting with executives from various commercial banks following the Monetary Policy Committee’s session.

The meeting took place at the Bank Square, the central bank’s headquarters, marking the first engagement between the new management team of the Bank of Ghana and the commercial banks.

Led by Dr. Asiama, the event brought together chief executives and representatives of regulated banks in the country, alongside senior officials of the Bank of Ghana.

Among them was the 1st Deputy Governor, Dr. Zakari Mumuni. This inaugural gathering served as an opportunity for the central bank’s leadership to engage with key stakeholders in Ghana’s banking sector.

Background

The Bank of Ghana’s Monetary Policy Committee has decided to increase its policy rate, which is the key interest rate it uses to guide commercial banks on lending. The rate was raised by 1% (or 100 basis points), bringing it up to 28%.

This is the first time since September 2024 that the central bank has made any changes to this rate. The move is likely aimed at addressing current economic challenges in the country, such as inflation or currency pressures. It also means borrowing could become more expensive for businesses and individuals, as banks use this rate to set their own interest rates for loans.

Justification

The Governor noted that the decision was “aimed at reinforcing the disinflation process, which, while underway, remains too gradual to secure lasting stability.

“The decline in headline inflation from 23.8% in December to 22.4% in March confirms that recent policy actions are having the intended effect,” the Bank of Ghana Governor observed

Dr. Asiama however noted that “ inflation expectations remain elevated, and core inflation is still above the medium-term target”.

“The Committee therefore adopted a proactive stance—guided by recent experience that delayed tightening can result in more persistent inflation and costlier adjustments” he added.

Post Policy Rate Hike and Concerns

Speaking at the meeting with heads of the various commercial banks, the Governor noted that the Bank of Ghana recognised the effect of the policy rate hike on borrowing costs of businesses and households.”

But was quick to add that “Viable businesses should continue to receive support, and tailored solutions to mitigate the impact on the most vulnerable sectors”.

Outlook and Concerns

The Bank of Ghana Governor noted that despite recent challenges the banking sector, even without reliefs “ showed sustained improvement on the back of improving solvency and asset quality measures amid strong liquidity and profitability”.

Dr. Asiama was quick to add that despite these solid developments, solvency concerns persist, “especially few domestically controlled and state-owed banks, whiles capitalization efforts remain unclear".

The Governor was of the view that addressing these capital shortfalls in these banks remains a priority.

“We are working closely with the affected institutions to achieve sustainable capital levels, restore depositor confidence and ensure compliance with regulatory requirements” the Governor disclosed

The Governor also advised the commercial banks to be guided by the past banking resolutions, especially shaping their crises preparedness.