Ghana, Egypt lead Africa’s biggest rate cuts as inflation falls

Ghana and Egypt led Africa’s most aggressive interest-rate cuts in 2025, as easing inflation, improving currency stability, and stronger external buffers gave policymakers room to pivot away from years of restrictive monetary policy. After some of the sharpest tightening cycles in decades to combat inflation triggered by currency devaluations, global supply shocks, and fiscal stress, central banks across the continent have begun recalibrating policy to support growth as price pressures retreat. One of the continent’s clearest macroeconomic gains this year has been the broad-based slowdown in inflation. Excluding Algeria, the nine biggest economies recorded an average inflation rate of 10.74 per cent in 2025, down from 16.28 per cent in 2024 and 15.57 per cent in 2023, according to data from Trading Economics and the World Bank. “In response to easing inflationary pressures, most central banks in sub-Saharan Africa have either started cutting rates or paused their tightening cycles,” the World Bank said in its latest Africa Pulse report, while cautioning that global geopolitical risks and financial volatility could still rekindle price pressures. Economic growth is also recovering. Following a trough in 2023, Africa’s GDP growth is projected to rise to 3.8 per cent in 2025 from 3.5 per cent in 2024, and accelerate further to an average of 4.4 per cent in 2026–2027. After what analysts describe as the most aggressive tightening cycle in decades, at least eight African central banks cut rates in 2025, according to Les Africanistes, a pan-African business consulting firm. Ghana: Africa’s most aggressive easer Ghana emerged as Africa’s most aggressive rate-cutter. Between January and November, the Bank of Ghana slashed its benchmark policy rate by 1,000 basis points from 27 per cent to 18 per cent, taking borrowing costs to their lowest level since April 2022. The scale of the easing reflects a dramatic macroeconomic turnaround. Inflation collapsed from 23.5 per cent at the start of the year to 6.3 per cent in November, firmly within the central bank’s 6–10 per cent target range. The cedi also strengthened by 26 per cent in the first 11 months, supported by improved fiscal management, debt restructuring, and record gold receipts. Inflation, which peaked above 54 per cent in December 2022 during the height of Ghana’s currency crisis, has now cooled sharply, giving policymakers confidence to unwind earlier emergency tightening without destabilising the exchange rate. “The country recorded a remarkable economic turnaround as the cedi appreciated to become the best-performing currency against the dollar this year, supported by higher gold prices and the innovative GoldBod programme, which significantly boosted foreign-exchange inflows,” said SBM Intelligence in its latest outlook report. Egypt: Sustained easing after record tightening Egypt followed closely, launching one of its most significant easing cycles in more than two years. Africa’s second-largest economy cut its key interest rate by a cumulative 725 basis points, lowering it to 20 per cent from 27.25 per cent between February and December. After maintaining elevated high borrowing costs for much of the past two years to rein in inflation caused by currency devaluations and fiscal imbalances, policymakers in Cairo shifted stance as price pressures eased and foreign currency inflows improved. Annual urban inflation slowed to 12.3 per cent in November from an average of 28.3 per cent in 2024, easing pressure on the central bank and allowing it to refocus on stimulating domestic investment and economic activity under its International Monetary Fund-backed reform programme. Kenya: Longest easing cycle Kenya delivered one of the continent’s most sustained easing cycles, cutting its benchmark rate by 175 basis points to 9.0 per cent in December from 10.75 per cent in February. Inflation remained within the target band, averaging 4.04 per cent for the year, while the shilling stayed broadly stable around 129 per dollar. The benign macro backdrop helped fuel a rebound in private-sector activity, with Kenya posting the strongest Purchasing Managers’ Index (PMI) reading among major African economies in November. South Africa: Gradual normalisation South Africa’s Reserve Bank adopted a more cautious approach, cutting rates by a total of 100 basis points to 6.75 per cent in November from 7.75 per cent a year earlier. Inflation has remained within the central bank’s 3–6 per cent target range, easing to 3.5 per cent in November. Lower fuel prices, softer food inflation and weak domestic demand have helped anchor prices, allowing policymakers to begin a slow normalisation of policy. Africa’s biggest economy, which has one of the continent’s highest unemployment rates, recorded a 1.3 percentage-point decline in the third quarter, with unemployment falling to 31.9 per cent—its lowest level since the fourth quarter of 2024—from 33.2 per cent in the second quarter. Nigeria: Cautious first cut since September 2020 Africa’s most populous nation joined the easing cycle cautiously in September, cutting its Monetary Policy Rate by 50 basis points to 27 per cent — the first rate reduction in five years. The move followed a sharp disinflation trend, with average inflation easing to 20.96 per cent in 2025 from 33.2 per cent in 2024, aided by stabilising exchange rates, lower fuel costs, and improved supply chains. The Monetary Policy Committee has since paused further cuts, signalling caution despite eight consecutive months of declining inflation. Following the country is Namibia, which also cut rates by 50 basis points to 6.5 per cent in October, balancing domestic stimulus with its currency peg to the rand. But Tanzania trimmed rates by 25 basis points to 5.75 per cent in June, supported by strong GDP growth and low inflation. Algeria also cut rates by 25 basis points in August as deflationary pressures persisted. Outlook: Diverging paths ahead According to Les Africanistes, countries with credible reforms and strong fundamentals — such as Ghana, Kenya, and South Africa — have been able to ease aggressively without triggering currency instability. Others are expected to remain cautious. Looking ahead to 2026, further rate cuts are likely across Africa, but the pace will vary sharply. While Ghana and Kenya still have room for additional easing, countries like Nigeria are expected to move slowly as they balance growth support with inflation risks. Bunmi bailey I hold a degree in Economics from the University of Lagos and have over eight years of experience in content writing and journalism. My career spans roles as a financial and business journalist at BusinessDay Media and TechCabal, and as Head of Research at SBM Intelligence, an Africa-focused market intelligence and strategic consulting firm. I also served as Editor at Finance in Africa, a subsidiary of Businessfront. I am currently Assistant Editor, Finance (Africa), at BusinessDay.

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