A Monetary Policy Committee (MPC) member who advocated cutting the policy rate from 18% to 15.5% highlighted solid global economic activity in 2025, projected to grow by 3.3% in 2026.
Inflation has eased in major economies, leading most central banks to relax monetary policy. Favorable global financial conditions bolstered by a weaker US dollar and lower yields offer support, though risks from geopolitical tensions, tariff disruptions, and oil price swings persist.
Domestically, macroeconomic conditions have improved markedly. Inflation fell for the 12th straight month to 5.4% in December 2025, thanks to stable exchange rates, better supply chains, and prior policy actions.
“Inflation expectations among consumers, firms, financial market participants, and economic experts have also fallen, reinforcing the disinflation trend,” the MPC member noted.
The external sector stays strong, with a large current account surplus and robust foreign reserves driving currency stability. Real economy signals like GDP growth, the Composite Index of Economic Activity (CIEA), Purchasing Managers’ Index (PMI), and sentiment indicators signal ongoing expansion. Monetary and financial conditions are normalizing, with rising liquidity and early private sector credit recovery.
Inflation risks remain balanced: upside pressures from utility tariffs, farm disruptions, and global commodity prices are countered by a strong currency, lower transport fares, reduced VAT, and cheaper fuel.
“Near-term forecasts show inflation staying within or below the target band’s lower bound,” he explained. “With disinflation entrenched, anchored expectations, and solid external fundamentals, keeping monetary policy too tight risks stifling growth and credit recovery.”
Current conditions warrant a “measured easing” of policy. “The economy is now positioned for disinflation to hold, expectations to stay anchored, and external factors to support us. A cautious rate cut will align real rates with inflation, boost confidence, spur credit, and aid recovery—while keeping inflation on target.”
He concluded: “I vote to cut the policy rate by 250 basis points to 15.5%, reaffirming the Committee’s readiness to act if inflation risks arise.”
Story by : Mercy Addai Turkson # ahotorfmonline.com