The FlowWealth View
The Policy Rate Cut: What It Actually Means for Ghanaian Investors
The Bank of Ghana has cut again. Most commentary will focus on borrowing costs. For the far larger group of Ghanaians holding Treasury bills and savings accounts, the consequential change is what their money earns when it next comes due — and that change is already underway.
Illustrative sample. This view was written to demonstrate FlowWealth’s publication format and is not a published research view. Figures are illustrative and must not be relied upon for any decision.
What Changed?
The Monetary Policy Committee reduced the policy rate again, continuing the easing cycle that began as inflation retreated from its peak. The accompanying statement pointed to broadening disinflation, including in core prices, as the justification.
Why It Matters
Ghanaian commentary treats a rate cut as news for borrowers. In practice, far more Ghanaians hold Treasury bills and savings deposits than hold commercial loans. For them a cut is not good news or bad news — it is a reduction in the return available on money they will need to reinvest, and it arrives quietly, at maturity, without any statement showing a loss.
Our View
We think the easing cycle continues but ends at a policy rate well above pre-2022 levels, because the government's domestic financing requirement has not been resolved and continues to underpin yields. We also expect the transmission to bank deposit rates to be slow and incomplete, as it has been in every previous Ghanaian easing cycle. The practical consequence is that the gap between what the government pays a saver and what a bank pays a saver should widen in the government's favour — even as both fall.
Investment Implications
- Fixed income
- Investors rolling 91-day paper face progressively lower reinvestment yields. The value already sits in positions extended earlier in the cycle; the remaining opportunity is narrower and carries liquidity risk in Ghana's thin secondary bond market.
- Cash and savings
- Deposit rates will fall more slowly than the policy rate, which sounds favourable but usually means they were already well below Treasury levels and remain so. The comparison worth making is the real, after-tax return on each.
- Equities
- A lower risk-free alternative historically coincides with increased interest in GSE equities. The effect is real but slow, and it does not improve the earnings quality of any individual company.
- Currencies
- A narrowing interest rate differential reduces the carry supporting cedi assets, which is the main channel through which easing can put pressure on the currency.
- Businesses
- Lending rates follow the policy rate down slowly, and credit availability has been constrained by bank balance sheet repair as much as by price. Borrowing conditions improve, but less and later than the headline suggests.
What Could Change Our View
- A renewed cedi depreciation large enough to feed visibly into import prices would re-import inflation and, on past behaviour, stop the cycle.
- An upward revision to core inflation, or divergence between core and services prices, would suggest the disinflation is narrower than we judge.
- A widening domestic financing requirement would push yields up regardless of the policy rate.
What We Are Watching
- Monthly CPI, with attention to core rather than headline
- Weekly Treasury auction clearing yields and bid-to-cover by tenor
- Published commercial bank deposit rates, to test the pass-through assumption
- USD/GHS and reserve cover
The reason we keep returning to the pass-through question is that it is where the gap between what people expect and what actually happens is widest.
When rates rise in Ghana, lending rates move quickly. Anyone with a loan finds out within a cycle or two. When rates fall, deposit rates move slowly, partially, and sometimes barely at all. Savers find out slowly, if they notice at all, because nothing arrives to tell them.
That asymmetry is not a scandal — it reflects competitive conditions in deposit markets and banks' funding needs — but it is a fact worth planning around rather than discovering. In an easing cycle, the saver who compares their bank rate to the Treasury bill rate at each maturity is making a better decision than the one who leaves the money where it is because the rate "seems fine".
The broader point is the one we make in most of our monetary policy work: the number that matters is not the policy rate, and not even the yield on your instrument. It is the real return — what your money earns after inflation has taken its share. A falling nominal rate alongside faster-falling inflation can leave you better off. A falling nominal rate alongside sticky inflation does not.
Which of those is happening is the only question worth asking about this cut.
Sources
- Bank of Ghana, Monetary Policy Committee statement
- Ghana Statistical Service, Consumer Price Index
Disclosures
The analysis in this publication reflects the views of the named authors at the date of publication and is based on information believed to be reliable at that time. Views may change as evidence changes. FlowWealth and its analysts may hold positions in securities or asset classes discussed; where a material conflict exists it is disclosed above. No representation is made that any forecast, scenario or estimate will be realised.
FlowWealth Research & Strategy produces independent research. This publication is not personalised investment advice and does not take account of the objectives, financial situation or needs of any individual reader. Read our full research disclosures and research methodology.
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