Policy Rate Cut Could Backfire, Fuel Inflation – UG Economist Warns BoG

An Economist at the University of Ghana, Dr. Adu Owusu-Sarkodie, has cautioned the Bank of Ghana (BoG) against any hasty reduction in its monetary policy rate, warning it could derail the country’s progress in taming inflation.

“We’ve seen this before, each time we ease too soon, inflation shoots up again. The Bank of Ghana must tread very carefully, especially at a time when inflation is not yet firmly under control.” Dr. Sarkodie told the media.

Ghana’s inflation has been declining gradually but remains above the central bank’s medium-term target. The current policy rate stands at 28%, acting as a critical anchor in BoG’s inflation-fighting arsenal.

Dr. Sarkodie highlighted historical trends where rate cuts were swiftly followed by spikes in inflation, undermining macroeconomic stability and worsening the plight of ordinary Ghanaians.

“With global commodity prices fluctuating and domestic pressures such as food and fuel prices still volatile, any policy misstep could reverse recent gains,” he warned.

The Monetary Policy Committee (MPC) is expected to announce its latest policy rate decision in the coming days. While some market players advocate a cut to stimulate growth, others echo Dr. Sarkodie’s call for caution.

“We all want growth, but not at the expense of stability. If inflation returns, the costs will be even higher in the long run especially for low-income households.”  he emphasised.

According to him, the central bank’s decision will send strong signals to financial markets and businesses about its policy priorities in navigating Ghana’s fragile economic recovery.

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