• The Bank of Ghana’s Monetary Policy Committee unanimously voted to keep the policy rate at 14%, citing inflation risks, global uncertainty and the need to preserve recent gains in economic stability.

• A 14% policy rate does not automatically mean banks will immediately change their loan or savings rates, as commercial banks also consider operating costs, competition and borrowers’ credit risk when setting interest rates.

• The Bank’s decision signals a cautious “wait-and-see” approach, with policymakers preferring to monitor inflation and global economic developments before considering any changes to borrowing costs.

To first clarify, the Monetary Policy Rate (MPR) is the interest rate the Bank of Ghana charges commercial banks when they borrow money from it. It influences all other interest rates in the country. Let’s say the Bank of Ghana is a wholesaler and commercial banks (GCB, Ecobank, Fidelity, Stanbic, etc.) are retail shops.

The Bank of Ghana sells money to banks and the price of that money is called the Monetary Policy Rate. The Banks will after add their own costs and profit before selling that money to customers through loans. So, if the Bank of Ghana charges banks 14%, banks usually lend to customers at a higher rate, not exactly 14%, it may charge 22%, 25% or even 30%, depending on its pricing.

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The Bank believes inflation could still rise if it cuts interest rates too soon. By keeping the rate at 14%, it is effectively saying that it is not making borrowing cheaper yet because we want to make sure prices continue to stabilize before encouraging more spending like the ‘wait and see’ option.

The Bank of Ghana (BoG) announced that it was keeping its benchmark Monetary Policy Rate (MPR) at 14%, and many Ghanaians are wondering whether bank loans would become cheaper or if savings and Treasury bill returns would change.

Minutes from the 131st Monetary Policy Committee (MPC) meeting show that all six voting members unanimously agreed to keep the policy rate unchanged because they believed the economy still faces enough inflation risks to justify caution, even though Ghana’s economic indicators continue to improve.

For households, however, the MPC’s decision is about much more than a number. It affects the cost of borrowing, returns on savings, business financing and even future mortgage and consumer loan rates.

According to the MPC minutes released by the Bank of Ghana, every voting member reached the same conclusion and that is to keep it the same because.

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Although inflation has slowed significantly from its recent highs and economic growth has strengthened, committee members said several threats could quickly reverse those gains.

Among the risks cited were the recent increases in headline and core inflation, rising inflation expectations among businesses and consumers and uncertainty over global oil prices linked to tensions in the Middle East.

One MPC member warned:

Rather than lowering or raising the benchmark rate, members agreed the safest option was to wait for more evidence that inflation is firmly under control.

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A 14% policy rate does not mean banks must immediately charge 14% interest on loans, nor does keeping it unchanged mean your existing loan repayments will remain exactly the same. The policy rate is simply the interest rate at which the Bank of Ghana lends to commercial banks.

It serves as a benchmark that influences borrowing costs across the financial system. Commercial banks set their lending rates after considering several additional factors, including the cost of raising deposits, their operating expenses, customer credit risk, competition within the banking sector and overall liquidity in the market.

That means even when the policy rate stays the same, banks may still increase, reduce or maintain their lending rates depending on their own business conditions.

For people with money in savings accounts or fixed deposits, the decision also does not guarantee immediate changes. Banks adjust deposit rates based on market conditions, liquidity and competition, not solely because the Bank of Ghana changes or maintains the policy rate.

As a result, savers are unlikely to notice any immediate difference in interest earned just because the MPC kept the benchmark rate at 14%.

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The MPC decision will not instantly affect returns on Treasury bills. Unlike bank lending rates, Treasury bill yields are determined through weekly government auctions, where investor demand and government borrowing needs play a significant role.

The latest auction results show that government securities continue to offer attractive returns, but those yields are influenced by market demand rather than automatically moving with the policy rate.

Although Ghana’s economy has shown encouraging signs, including easing inflation, exchange-rate stability and improved external reserves, the MPC believes the fight against inflation is not over. Global developments remain a major concern.

Higher oil prices caused by geopolitical tensions could increase transport and production costs, eventually pushing up prices for food and other essentials in Ghana. Committee members therefore concluded that reducing interest rates now could undo months of progress in stabilising the economy.

Households should expect stability rather than immediate change. Households should not expect commercial banks to automatically lower loan rates because the policy rate remains unchanged. Likewise those who save should not expect an immediate increase in deposit returns, while Treasury bill yields will continue to be determined by market conditions and government borrowing.

The MPC minutes show policymakers are taking a “wait-and-see” approach which is one aimed at protecting recent economic gains while monitoring inflation before making any move on interest rates.