Bank of Ghana Governor, Dr. Johnson Asiama, has revealed that developments in the Middle East and news of a peace deal being reached will influence Ghana's inflation outlook going forward.

The Governor noted that "clearly, the outlook has now changed, and we are monitoring events in the coming days and weeks until the next meeting of the Monetary Policy Committee."

Dr. Asiama made the disclosure during a post-Monetary Policy Committee (MPC) meeting with Heads and Managing Directors of commercial banks at the Bank of Ghana headquarters.

The meeting forms part of the Bank's bi-monthly engagements with heads of banks to "frankly deliberate."

According to the Governor, "These engagements have become an important platform for open and candid dialogue, towards building a resilient and inclusive financial system."

The Governor also noted that these developments will clearly influence discussions and deliberations at the next Monetary Policy Committee meeting.

Dr. Asiama further indicated that the decision taken at the last MPC meeting to maintain the policy rate at 14 percent was influenced by the fact that, at the time, "risk to inflation and growth were broadly balanced and we thought that that things might change going forward."

The Bank of Ghana Governor had earlier revealed in an interview with Bloomberg that developments in the Middle East would influence the Bank's policy rate stance in the coming months.

He added that there could be a return to the easing cycle for the policy rate if developments in the Middle East normalise quickly.

Review of Cash Reserve Requirement

At its last Monetary Policy Committee meeting, the Bank of Ghana amended the dynamic Cash Reserve Ratio to a uniform ratio of 20 percent, to be maintained in domestic currency. The directive took effect on June 4, 2026.

Speaking to Joy Business on PM Express Business Edition in May 2026, the Chief Executive Officer of the Ghana Association of Banks, John Awuah, expressed concerns about the new directive.

Mr. Awuah noted that the review could affect lending, the cost of credit, and even deposits.

He also argued that the proposal, as it currently stands, may present challenges for commercial banks in holding customer deposits in both cedis and foreign currencies.

However, at today's engagement with the Managing Directors and heads of commercial banks, the Bank of Ghana Governor said the committee took the decision because it wanted to enhance the effectiveness of liquidity management within the banking system.

He went on to add that, "Maintaining reserves in domestic currency will improve liquidity forecasting, strengthen monetary policy transmission."

The policy action will also "reduce operational complexities associated with the previous dynamic framework, and support the continued deepening of the domestic financial market," the Governor added.

"Importantly, the new framework provides a more predictable and equitable reserve management structure across institutions while preserving adequate liquidity buffers within the system," Dr. Asiama stated.

Ghana's Economic Recovery

Ghana's economy has recorded significant improvements in its macroeconomic indicators.

Inflation slowed significantly over the past year, although it increased marginally in May 2026.

Headline inflation edged up slightly to 3.4 percent in April and further to 3.7 percent in May 2026, from 3.2 percent in March, marking the first consecutive increases since December 2024.

Fiscal performance, on the other hand, has remained supportive, with expenditure containment measures resulting in a surplus of 0.1 percent of GDP during the first quarter of 2026, exceeding programme expectations.

However, the Governor noted that despite these developments, elevated credit risk remains a major concern, and banks must continue to strengthen credit underwriting standards and fully comply with regulatory requirements aimed at reducing non-performing loans to tolerable prudential targets.

Dr. Asiama was of the view that, "As we sustain stable macroeconomic conditions, let me reiterate that the banking industry must increasingly turn its attention to its fundamental role of financial intermediation and support for productive economic activity."