With prices stabilised, BoG turns to expectation management

By Joshua Worlasi AMLANU

The Bank of Ghana is shifting the focus of monetary policy toward managing expectations after a year in which inflation eased sharply and financial conditions stabilised, Governor Dr. Johnson Pandit Asiama said during the central bank’s new year media engagement.

After what the bank describes as a period of “restoration” in 2025, policy-makers are now aiming to lock in credibility and prevent a relapse into instability. Inflation slowed to 5.4 percent by December 2025 from 23.8 percent a year earlier, reflecting tight monetary conditions, improved liquidity management and clearer communication, according to the bank.

Dr. Asiama said policy decisions are guided by principles rather than short-term pressure, stressing that the central bank’s approach is “data-driven and forward-looking,” with stability taking precedence over speed.

He said the bank deliberately avoided quick fixes that could undermine credibility over time, opting instead for measures that could be sustained even when they were costly or unpopular.

“We do not respond to pressure, speculation or sentiment. We respond to evidence, risks and the medium-term outlook for price and financial stability,” the governor said, adding that rebuilding credibility required patience and discipline rather than abrupt policy shifts.

The emphasis on expectation management marks a transition for the Bank of Ghana, which spent much of 2025 containing inflation, restoring order in markets and rebuilding trust after years of volatility. With headline inflation now close to target, the bank’s priority is to ensure that households, businesses and investors believe stability will be maintained.

Beyond inflation, the central bank pointed to progress in strengthening the banking system. Regulatory reforms were advanced to improve stress testing, recovery planning and risk-based supervision, while engagement with lenders and coordination with other regulators intensified.

The aim, Dr. Asiama said, was to move supervision toward prevention rather than cure.

In financial markets, reforms introduced last year are being consolidated. A rules-based foreign exchange auction system, tighter oversight and improved reporting requirements helped improve price discovery and reduce distortions in the FX market. Confidence has gradually returned, supported by a rise in gross international reserves to more than US$13.8billion, equivalent to about 5.7 months of import cover, partly due to the Domestic Gold Purchase Programme.

“These programmes involved costs, but they delivered tangible stability benefits and should be understood as strategic interventions in support of macroeconomic and external resilience,” Dr. Asiama said.

Legislative changes also featured prominently. Parliament’s passage of the Bank of Ghana Amendments Bill, 2025 strengthened the central bank’s independence and tightened safeguards around financing government, aligning Ghana’s framework more closely with international practice.

The governor said 2026 would be about consolidation and discipline rather than expansion. Monetary policy will remain measured and predictable, with clear signalling designed to reinforce credibility rather than surprise markets. Supervisory focus will deepen on governance, capital planning and early risk detection, while financial market reforms will be embedded into routine practice.

“The emphasis this year is quality over quantity – strong institutions, disciplined markets and policies that endure,” Dr. Asiama said. He added that the responsibility now is to protect the hard-won stability achieved over the past year.

 

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