Ghana's broad money supply, known as M2+, accelerated to 22.2 percent year-on-year in April, a notable increase from 16.0 percent in February. This surge in liquidity follows a period where the Bank of Ghana (BoG) had been reducing its benchmark Monetary Policy Rate (MPR) since July 2025, initially without a corresponding expansion in money supply.
The acceleration in money supply growth is now contributing to a resurgence in headline inflation, which began after March 2026. While external cost shocks and domestic supply-side developments are significant factors, the increased liquidity has reduced the monetary restraint that previously helped lower inflation. This shift marks a change from the BoG's earlier strategy of separating interest rate signals from actual liquidity management.
This development fits into Ghana's broader economic narrative of managing inflation while fostering economic growth. The BoG had successfully brought inflation down from 23.8 percent at the end of 2024 to 3.2 percent by March 2026 through tight monetary conditions, fiscal discipline, and a stronger cedi. The current increase in money supply, however, poses a challenge to maintaining this hard-won price stability.
According to Norvan Reports, the evidence suggests that while monetary expansion is exerting upward pressure on prices, it is not the sole driver of the recent inflation uptick. The publication highlights that external cost shocks and domestic supply-side issues have played a larger role. However, the faster growth of liquidity has undeniably reduced the degree of monetary restraint that previously accelerated Ghana's disinflation process.
Looking ahead, policymakers and markets will closely watch the BoG's response to this evolving situation. The central bank may need to reconsider its monetary policy stance if inflation continues to rise, potentially leading to adjustments in interest rates or renewed efforts to absorb excess liquidity. The balance between supporting economic activity and controlling inflation will be a critical challenge for the coming months.
The BoG's strategy in 2025 involved reducing the MPR while maintaining tight control over liquidity. Reserve money growth slowed dramatically to 12.5 percent year-on-year in December 2025, down from 47.8 percent a year earlier. Broad money growth also moderated to 16.5 percent from 31.9 percent over the same period. This unique policy mix allowed for disinflation even with lower interest rates, as the central bank used open market operations to sterilize excess banking system liquidity.
However, the monetary picture began to change in the second quarter of 2026. By February 2026, reserve money had contracted by 0.5 percent year-on-year, but by April, it rebounded to 3.6 percent growth. The most significant change was the acceleration in broad money growth to 22.2 percent. This increase reflects several factors, including declining Treasury bill yields, which reduced the need for aggressive liquidity sterilization. Falling inflation also lowered the real cost of holding monetary assets, and improving banking sector confidence encouraged stronger deposit mobilization and credit intermediation.
This shift in liquidity conditions indicates a significant easing compared to the previous period of tight monetary control. While the current growth rates are still far below the rapid monetary expansion seen during earlier inflationary episodes, the more than six percentage point increase in broad money growth since February is a clear indicator of changing dynamics. The implications for Ghana's inflation outlook are substantial, requiring careful monitoring by economic analysts and the public.