The Governor of the Bank of Ghana announced a significant policy shift:“Overall, the Committee noted that macroeconomic conditions have significantly improved, inflation expectations are broadly anchored, external buffers have strengthened, and confidence in the economy is returning…… Given these considerations, the Committee, by a majority decision, voted to lower the Monetary Policy Rate (MPR) by three hundred (300) basis points to 25.0 percent.”

Following this announcement, the Ghana Association of Banks projects “a good reduction” in interest rates from August 6, 2025, as reported by JoyNews. The question is: what does this mean for the average Ghanaian’s pocket? This piece provides the answers.

What is the MPR and Why Does it Matter?

The Monetary Policy Rate (MPR) is the rate at which the Bank of Ghana lends to commercial banks. The MPR is one of the fundamental macroeconomic tools and its level affects lending rates across the economy, and consequently, the living conditions of Ghanaians. The recent three hundred (300) basis points (3%) reduction in the MPR is expected to lower interest rates and stimulate economic activities, thereby improving the well-being of Ghanaians across households and businesses.

Easier Access and Cheaper Credit

The reduction means that it will be much easier to access credit/loans than before, and at a lower cost. This translates into reduced monthly repayment on loans. This is true for
businesses as well. With accessible credit at affordable rates, the kenkey and gobe seller or micro, small, and medium-sized enterprises (MSMEs), can access cheaper credits and
expand their enterprises. As their enterprises expand, more people will be employed, leading to a reduction in the unemployment rate.

Additionally, households can borrow at lower cost to achieve their aspirational goals like buying a house, or personal cars, etc or in case of emergencies which are part of life.

Similarly, to manage short-term cash deficits, businesses may utilise overdraft facilities at comparatively lower interest rates. This approach helps prevent overtrading—a situation in which a company undertakes more transactions than its available cash flow can sustain.

Macroeconomic Environment

Furthermore, the reduced interest rate level means there will be a boost in general economic activities (increase in the real GDP rate) than before since other macroeconomic indicators like rate at which prices are rising (inflation), revenue generation and expenditure policy (fiscal policy), level of indebtedness (debt-to-GDP ratio), foreign exchange reserve (capacity to manage to manage foreign exchange rate), etc , are all pointing to the right direction.

The reduction in the MPR from 28% to 25% indicates that the Bank of Ghana assesses inflation to be under control, deems market conditions sufficiently stable for an expansionary monetary policy stance, and observes increased confidence in the economy that may support borrowing and lending.

Expected Trend

Therefore, the Monetary Policy Committee’s decision to reduce the MPR is a significant measure that will positively impact the living standards and overall well-being of Ghanaians. Despite the fact that a 25% MPR is still high, the good news is that the downward trend is expected to be sustained through the continued efforts of the Minister of Finance, the Governor of the Bank of Ghana, and their respective teams, under the steady and people-centred leadership of President John Dramani Mahama.

The Economic Intelligence Unit (EIU) and other research organisations have all projected this trend will continue. For example, in a five-year forecast, the EIU projected that short-term interest rate will be around 13.2% by 2029.

Fasten your seat belt and enjoy the smooth ride with the steer now firmly in the hands of President Mahama.

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The author is Dzigbordi Kofi Agbekpornu, a Senior Finance and Data Analyst.