Ghana significantly reduces interest rates to record low levels
In the mid-year of 2025, the Bank of Ghana took a significant step towards economic recovery by aggressively easing its monetary policy. The benchmark policy rate was cut from 28% to 25%, marking the largest single reduction in recent years. This move reflects confidence in ongoing disinflation and macroeconomic stabilization, aiming to lower borrowing costs and stimulate private sector investment [1][3][4].
The decision was prompted by a significant slowdown in inflation, which eased to 13.7% in June, largely due to a rally by the cedi, one of the best-performing currencies against the dollar this year [1][2]. Ghana's economy experienced above-expected growth in 2024 (5.7%) but is forecasted to slow to 4.0% in 2025 due to fiscal tightening efforts and other headwinds; medium-term growth is expected to stabilize near 5% with reforms [2].
In contrast, South Africa's economic outlook as of mid-2025 is subdued, with projected growth around 1%. This reflects ongoing structural challenges, although specific recent monetary policy changes are not detailed in the available data [4]. The subdued outlook and low growth suggest a cautious or possibly accommodative stance by the South African Reserve Bank to support growth amid modest inflation pressures, common in advanced emerging markets.
While South Africa's central bank lowered its inflation target from 4.5% to 3%, the continent's largest economy faces a 30% tariff on its exports, with Pretoria still pursuing a trade deal [4][5].
Meanwhile, political uncertainty in Cote d'Ivoire has caused most business decisions and investments to stall, according to an investor. President Alassane Ouattara, 83, cited the constitution of Cote d'Ivoire and his health as reasons for running for another term, sparking controversy [6][7]. The court barred former Credit Suisse CEO Tidjane Thiam from running in June, leading to speculation over Ouattara's candidacy [7].
In Lesotho, a 50% levy, the highest in Africa, is set to threaten the nation's textile industry, prompting a state of emergency declaration [8]. On the brighter side, Africa's top gold exporter has benefited from a spike in the price of the precious metal, which has boosted foreign exchange reserves [9].
The technology sector in southern Africa saw a surge in investments, with around $180 million invested in startups last year across a record 224 deals, marking a 17% year-on-year increase in deal volume [10]. The health sector, led by medical services providers, was the next best, making up a fifth of the total investments [10].
However, the government of Angola raised the price of diesel by more than 33% this month, causing steep rises in the cost of public transport, staple food, and other necessities. This move led to protests and violence, resulting in the deaths of four people and the arrest of 500 [11].
Relations between South Africa and the US have been strained in recent months over Pretoria's condemnation of Israel's war in Gaza and US President Donald Trump's false claim of a white "genocide" in South Africa [12]. African countries are braced for the US to impose new tariffs on imports from Aug. 1, with most countries facing a baseline 10% tax on their exports [13].
In summary, Ghana has embarked on a notable monetary easing cycle, while South Africa faces subdued growth prospects. Both central banks’ policies significantly impact their economies by influencing borrowing costs, investment, inflation control, and overall macroeconomic stability. Meanwhile, political uncertainties and trade tensions continue to pose challenges across the African continent.
Finance experts are closely watching Ghana's monetary policy changes, as the Bank of Ghana's decision to ease its policy reflects confidence in ongoing economic recovery [1][3][4]. In contrast, South Africa's Reserve Bank may adopt a cautious or accommodative stance to support growth amid modest inflation pressures, influenced by the country's subdued economic outlook and low growth [4]. Additionally, politics play a significant role in business decisions and investments across Africa, as seen in the stalled business decisions in Cote d'Ivoire due to political uncertainty [6][7]. These factors, along with trade tensions, can have a profound impact on the general-news and business landscape across the continent.
