The Bank of Ghana absorbed GH¢21.41 billion from the financial system in a single week, stepping up liquidity management operations as the central bank prepares to announce its next monetary policy decision.
The latest operations involved the issuance of 14-day Bank of Ghana Bills, through which the central bank temporarily sterilises excess liquidity held by banks and other participating financial institutions.
The first tender, held on Monday, saw the Bank of Ghana accept the full GH¢13.71 billion offered at an interest rate of 10.5%. A second tender conducted on Wednesday resulted in a further GH¢7.7 billion being absorbed at the same rate. Combined, the two operations bring the amount of liquidity taken up through the short-term instruments this week to GH¢21.41 billion.
The scale of the operations highlights the Bank of Ghana’s continued focus on managing liquidity conditions in the financial system, a key component of the transmission of monetary policy.
Because the instruments have a 14-day maturity, the funds are being temporarily sterilised, allowing the central bank to influence short-term liquidity conditions while retaining the flexibility to release the funds back into the system as the bills mature.
A Return to the Short End of the Market
The 14-day BoG Bill has been the central bank’s primary open market operations (OMO) instrument since November 2025, when the Monetary Policy Committee overhauled its liquidity-management framework and retired the 56-day and 273-day bills that had dominated liquidity absorption in recent years. Governor Dr Johnson Pandit Asiama described the shift as a return to “the very shorter end of the market”.
Unlike Treasury bills, which are issued by government to finance public expenditure, BoG bills are deployed primarily for liquidity management and monetary policy operations. The 14-day instrument is issued exclusively to commercial banks and functions as a monetary policy instrument rather than a mechanism for financing government expenditure.
The move was part of a broader effort to strengthen monetary policy implementation. The International Monetary Fund has noted that the BoG is scaling up open market operations to make them the primary instrument for liquidity absorption and reduce reliance on the unremunerated cash reserve ratio (CRR). In June 2026, the BoG also replaced its dynamic CRR framework with a uniform 20% Cash Reserve Ratio.
Historical Context: An Aggressive Liquidity-Sweeping Programme
The latest operation is the most recent in a series of substantial liquidity mop-ups conducted throughout 2026. In late July, the central bank absorbed GH¢28.21 billion from commercial banks through two 14-day bill auctions. Earlier in June, it withdrew GH¢17.24 billion at a weighted average interest rate of 10.98%. In May, a single auction absorbed GH¢19.06 billion.
Since January 2025, the Bank of Ghana has sterilised well over GH¢300 billion in excess liquidity through its OMO operations. Reserve money, which contracted earlier in 2026, has rebounded strongly, while broader measures of money supply have continued to expand. Total liquidity — measured by broad money and foreign currency deposits — increased by 28.5% year-on-year to GH¢417.6 billion in June. Reserve money also rose by 31.7% to GH¢148.5 billion, largely reflecting increased reserves held by commercial banks.
The central bank acknowledged during its May MPC meeting that interbank interest rates remained close to the lower end of the policy corridor, an indication of surplus liquidity within the financial system. The interbank weighted average rate has continued to trend close to the lower bound of the policy corridor, indicating increased market liquidity at the floor level.
Economists note that sterilisation through BoG bills is intended to reduce the risk of excess liquidity fuelling inflation, speculative demand for foreign exchange, and unsustainable growth in aggregate demand.
MPC Decision Looms with Rate Cut on the Table
The Bank of Ghana’s 132nd Monetary Policy Committee meetings are scheduled for September 22 to 24, with the policy decision expected on Thursday, September 24.
The central bank has maintained its policy rate at 14.0% since March 2026, when the MPC reduced it by 150 basis points from 15.5%. The Committee has held the rate steady at its subsequent meetings in May and July.
Market analysts are divided on the likely outcome. Databank Research projects that the MPC could cut the policy rate by 150 basis points to 12.5%, citing continued correction in inflation towards the central bank’s medium-term target band of 8±2%. The firm noted that private-sector credit growth increased by 41.2% year-on-year in nominal terms and 34.1% in real terms, while the banking sector maintained strong capital buffers with an industry-wide Capital Adequacy Ratio of 20.4% and an improving non-performing loan ratio of 16.1%.
IC Insights, however, expects the MPC to retain the policy rate at 14%. According to the market research firm, the real policy rate of 9.0% suggests room for a modest cut, but the Committee is likely to preserve policy headroom to accommodate any unexpected spike in inflation without requiring a near-term hike.
Inflation Ticks Up, Cedi Under Pressure
The MPC’s deliberations will be informed by recent inflation data showing a second consecutive monthly increase. Ghana’s year-on-year inflation rate rose to 5.0% in August 2026, up from 4.6% in July, according to the Ghana Statistical Service. Non-food prices, particularly housing, water, electricity, gas, and transport, drove the increase.
Despite the uptick, inflation remains below the lower bound of the Bank’s 6.0–10.0% target band. The BoG’s July 2026 Monetary Policy Report reiterated that inflation is projected to trend into the medium-term target band of 8±2%, barring any significant shocks, influenced by upward revisions in utility tariffs.
External risks remain a concern. Global geopolitical tensions, particularly the Middle East conflict, have disrupted supply chains and increased crude oil market volatility, raising the risk of imported inflation. Goldman Sachs and Absa Group have suggested that the window for the Bank of Ghana to resume policy easing this year may have closed due to fresh inflation pressures from renewed tensions in the Middle East.
The cedi has also faced renewed pressure. LSEG data showed the cedi trading at 11.50 to the dollar as of mid-September, compared to 11.45 a week earlier, with dollar demand from the energy and services sectors continuing to outstrip supply on the interbank market. The Bank of Ghana is expected to maintain a tight policy stance to support the currency.
Transmission to Money Markets
The latest liquidity absorption could have implications for short-term money-market conditions, bank liquidity, and funding costs, depending on how participating institutions adjust their balance sheets and liquidity positions.
The Ghana Reference Rate — the benchmark used by commercial banks to price loans — declined to 10.18% in September 2026 from 23.80% a year earlier, representing a 13.62 percentage-point reduction within 12 months. The Treasury bill rate fell from 5.7881% to 4.8856%, while the interbank rate eased slightly from 10.23% to 10.20%.
The Bank of Ghana has previously indicated that liquidity management and sterilisation remain important tools in maintaining the appropriate monetary policy stance. Its latest monetary policy report also identifies sterilisation efforts as part of the measures supporting the inflation outlook.
Market attention will now turn to how the sizeable liquidity absorption affects money-market rates and bank liquidity in the days leading up to the MPC meeting, and whether the central bank’s decision on September 24 signals a resumption of the easing cycle or a continued pause amid external uncertainty.
