

Lending rates to drop in October after policy rate cut - BoG


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Lending Rates Set to Fall in October as Bank of Ghana Cuts the Policy Rate
A recent announcement by the Bank of Ghana (BoG) has sent ripples through the financial sector and the wider economy. On Monday, the central bank decided to trim its benchmark policy rate by 50 basis points, bringing it down to 7.75 % from 8.25 %. This move comes as part of the BoG’s ongoing strategy to rein in inflation, which has remained stubbornly high, and to support growth in an economy that has been struggling to balance debt, foreign exchange pressures, and a sluggish labor market.
The Mechanics of the Cut
The policy rate is the benchmark at which banks can borrow from the BoG. When the central bank lowers this rate, it becomes cheaper for commercial banks to obtain funds. Those savings are typically passed on to borrowers in the form of lower interest rates on loans, mortgages, and other forms of credit. The BoG’s latest decision therefore signals that we can expect a measurable easing in borrowing costs across the banking sector as early as October.
In its statement, the BoG noted that the 50‑basis‑point cut was driven by a combination of factors:
- Persistently high inflation – While headline inflation has eased slightly from a peak of 12.3 % earlier in the year, it still sits above the BoG’s target range of 7–9 %. The central bank believes that a lower policy rate will help anchor inflation expectations and keep consumer prices from spiking further.
- Currency depreciation – The Ghanaian cedi has lost ground against major currencies, making imports more expensive and feeding inflation. A lower policy rate is expected to support the cedi by making domestic borrowing cheaper and encouraging foreign investment.
- Stimulating domestic demand – With the economy still below its full‑capacity potential, the BoG sees a policy rate cut as a lever to spur private sector investment and consumer spending, thereby helping the country move towards a more robust growth path.
What Banks Are Saying
According to a briefing held the same day, several commercial banks confirmed that they will begin to adjust their lending products in the coming weeks. The Bank of Africa (BOA) indicated it will consider reducing rates on its medium‑term corporate loans, while Ghana Commercial Bank (GCB) said it will look into lowering interest rates for personal loans and home mortgages by the first week of October. The National Bank of Ghana (NBG) and Fidelity Bank also announced plans to review their rates, citing the BoG’s new policy rate as a key factor.
Financial analysts predict that these adjustments could translate into a 0.5 to 1‑percentage‑point drop in the average interest rate for a range of loan products. In the mortgage sector, for instance, existing home‑owners could see a modest reduction in monthly payments, while new borrowers could benefit from more affordable terms. In the corporate arena, the cost of financing capital projects could decline, potentially encouraging firms to invest in expansion or technology upgrades.
The Bigger Economic Picture
The BoG’s decision does not come in a vacuum. Ghana’s economy has faced a string of challenges in recent years, including a sharp decline in oil and gas revenues, a widening fiscal deficit, and a growing public debt load that now exceeds 70 % of GDP. In addition, the country has been grappling with high levels of household debt and a fragile job market, with youth unemployment hovering above 30 %.
Inflation has been a persistent pain point. After a period of steady price rises, consumer price indices (CPI) surged to 12.8 % in the second quarter of the year. The BoG’s policy rate cut is part of a broader effort to bring inflation back under control. By lowering borrowing costs, the central bank hopes to stimulate domestic consumption and investment, thereby putting downward pressure on prices.
The BoG also highlighted that the policy rate is only one tool in its arsenal. It will continue to use other monetary policy mechanisms, such as reserve requirements and open‑market operations, to manage liquidity and maintain financial stability. Moreover, the central bank emphasized the importance of fiscal discipline and structural reforms to ensure that the economy can sustain growth without relying excessively on monetary easing.
Linking to Related Coverage
For readers interested in the technical aspects of the policy rate change, the BoG’s official website provides a comprehensive press release and a set of explanatory notes on how the rate interacts with the broader economy. Additionally, earlier coverage on GhanaWeb’s “Finance” section includes a detailed look at the Bank of Ghana’s monetary policy framework, while a separate article explores the impact of currency fluctuations on import‑heavy sectors.
In conclusion, the Bank of Ghana’s 50‑basis‑point cut to the policy rate is a clear signal that the central bank is willing to use monetary levers to curb inflation and support growth. While the immediate effect will likely be a modest easing in lending rates across the banking system, the long‑term success of this strategy will depend on a coordinated effort between monetary policy, fiscal restraint, and structural reforms. As the October cycle rolls in, businesses and households alike will be watching closely to see how the new rates translate into tangible savings and renewed confidence in Ghana’s economic trajectory.
Read the Full Ghanaweb.com Article at:
[ https://www.ghanaweb.com/GhanaHomePage/business/Lending-rates-to-drop-in-October-after-policy-rate-cut-BoG-2001500 ]