In brief
- Cutting through the noise with conviction. The Bank of Ghana’s monetary policy committee delivered a 150bps cut in the policy rate to 14.0% in March 2026, citing confidence in the strong domestic macro fundamentals despite geopolitical risks. While we had shifted our call from 150bps cut to a hold amid the geopolitics-induced spike in oil prices, the MPC remained dovish, supported by subdued core inflation and strong external account buffer. That said, the post-meeting real policy rate remains elevated at 10.7%, reflecting continued policy restraint and shock absorption capacity.
- Duration gains have been largely priced-in. We foresee a shift towards carry strategies. Following the January 2026 rate cut, yields across money market instruments have fallen into single digits, as we opined, with a bull-steepened curve supporting strong demand for duration. At current levels, we believe most of the capital gains have materialised, while rising inflation risks and mild sell-offs suggest cautious and selective re-entry. We expect the policy rate cut to cap yields ahead of the Treasury’s imminent bond issuance.
- Banking sector exhibiting strong fundamentals but earnings growth peaks. The early-2026 data show that banks have largely rebuilt capital buffers, with CAR at 18.6%, and only two state-owned banks yet to fully recover, posing limited systemic risk. However, we believe earnings momentum appears to have peaked as falling rates compress net interest margins (NIMs). With NPLs still high (18.7%), we expect most banks to stay cautious on loan growth as management implements measures to comply with regulatory cap of 10.0% by end-2026. In our view, the lower NIMs amid constrained loan book growth signals peak earnings momentum with earnings growth normalisation ahead.
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