Mighty fall: What inflation falls means to businesses, and households

By Prof. Samuel LARTEY

[email protected]

In September 2025, Ghana’s year-on-year inflation fell to 9.4%, down from 11.5% in August, its lowest reading since August 2021, and the first single-digit print in four years.

The decline was broad-based: food inflation eased to 11.0% (from 14.8%), non-food to 8.2% (from 8.7%), with locally produced items at 10.1% (from 12.2%) and imported items at 7.4% (from 9.5%).

The downshift in inflation coincides with a large monetary policy easing, the Bank of Ghana (BoG) cut the policy rate by 350 bps to 21.5% on 17 September 2025 (after a 300 bps cut in July), citing continued disinflation and an improving outlook.

These developments arrive as Government pursues a “Reset the Economy for the Ghana We Want” agenda set out in the 2025 Budget, an explicit call to restore stability, rebuild institutions and reignite growth.

The Macro Turn: Why Inflation Fell

Food prices cooled materially, driving the headline downshift. This dynamic, alongside better supply conditions and tighter policy earlier in the cycle, has anchored inflation expectations closer to target.

The BoG sees inflation returning to its 6–10% medium-term band in Q4-2025, consistent with the September reading. Growth momentum is improving: real GDP expanded 6.3% (provisional) in Q2-2025, supporting a “disinflation with growth” narrative.

Implications for the Government’s Reset Agenda

Budget anchor. The 2025 Budget framed stabilization as the first step to “reset” the economy. A single-digit CPI reading materially improves fiscal planning (more predictable revenue/interest costs) and reduces indexation pressures on wages and transfers. Cheaper policy stance. With easing inflation, the BoG’s cumulative 650 bps rate cuts (July and September) lower the economy-wide cost of capital and align with a fiscal-monetary mix more supportive of recovery under the Reset Agenda.

Reference rate & lending: Authorities have moved to reform the Ghana Reference Rate (GRR) a key lending benchmark,  aiming to translate disinflation and policy easing into lower commercial lending rates over time. For context, GRR stood around 23.08% in June 2025 before bank risk premia. Sustained disinflation reinforces the case for continued GRR compression.

FX transparency: BoG also announced an updated methodology for the Foreign Exchange Market Reference Rate on October 1, 2025, a step that can reduce pricing opacity and improve confidence in currency formation, important for pass-through to prices.

Bottom line for the Reset: A stable, single-digit inflation regime lowers fiscal risk, eases debt-service pressures as yields drift down, and improves investor sentiment, all central to “resetting” macro fundamentals.

What It Means for Businesses and Corporates

1. a) Financing costs and planning

Policy rate cuts should nudge lending rates lower, though the pass-through will be gradual and conditioned by bank funding costs, risk premia and GRR mechanics. Near term, firms can refinance shorter-tenor facilities and re-price working-capital lines as banks reset base rates.

Treasury yields typically track disinflation and policy easing. As government paper cheapens, banks gain room to re-balance from securities to private credit, improving credit availability to productive sectors (manufacturing, agribusiness, logistics). (Inference based on standard transmission; monitor actual auction results.)

1. b) Input costs and supply chains

Food and imported-goods disinflation lowers costs for FMCGs, hospitality, and food processors. Firms can lock in supplier contracts and update 2025/26 price lists with tighter mark-up assumptions. With FX reference-rate reforms and softer inflation, exchange-rate pass-through risks may ease, supporting inventory planning for import-reliant sectors.

1. c) Strategy and risk

Shift from “defensive pricing” to market-share plays: promotional pricing, volume recovery, and product-mix upgrades are more viable when inflation volatility subsides. Move from quarterly to semi-annual price reviews; tighten working-capital cycles; re-open postponed capex with hurdle rates updated for lower inflation.

What It Means for Households

1. Purchasing power:

A drop from 11.5% to 9.4% in one month is meaningful for real incomes, especially as food inflation, the largest household basket item fell sharply (14.8% – 11.0%). Essentials like staples and fresh produce should see slower price increases than earlier in 2025.

1. Debt service:

If banks pass through policy easing and GRR reforms succeed, loan repayment burdens on mortgages, autos, and MSME loans can moderate over the next review cycles.

Household budgeting tips (now):

Re-price loans:

Ask lenders about upcoming base-rate resets; evaluate switching from variable to hybrid structures.

Lock in essentials:

Negotiate longer-tenor supply contracts with retailers/wholesalers where feasible.

Emergency fund:

Disinflation periods are ideal for rebuilding 3–6 months of expenses as a buffer.

Energy & transport:

Monitor fare and utility announcements; falling inflation often slows the cadence of tariff adjustments (though not guaranteed).

Risks and Sustainability

External shocks (fuel, global food prices) and weather-related supply disruptions could re-ignite food inflation. Keep tracking monthly CPI composition from the GSS.

Transmission lags:

Despite BoG cuts, lending rates may decline slowly if risk premia remain elevated; GRR reform is key to improving pass-through.

Policy credibility:

Sustained single-digit inflation requires continued fiscal discipline as outlined in the 2025 Budget framework, plus steady FX market reforms that anchor expectations.

Conclusion

Ghana’s September 9.4% inflation print is more than a milestone; it is a turning point. The combination of broad-based disinflation, record policy easing, and market-infrastructure reforms strengthens the Government’s Reset Agenda, offering businesses a clearer path to lower financing costs and more predictable input prices, while giving households tangible relief at the checkout and in monthly budgets.

To lock in these gains, stakeholders should press ahead with GRR and FX-rate transparency reforms, maintain fiscal prudence, and keep improving supply-side resilience. Do that and single-digit inflation can become the new normal, not a brief stop on the way back up.

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