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Botswana holds rate, says inflation outlook is positive

October 24, 2012 | Central Bank News

The central bank of Botswana held its benchmark bank rate unchanged at 9.5 percent, saying the medium-term outlook for inflation is positive and the current policy stance should ensure that inflation hits the bank's target.

In the short term, however, the Bank of Botswana expects inflation to exceed its 3-6 percent target range due to temporary increases of administered prices. In September, the annual inflation rate rose to 7.1 percent from 6.6 percent in August due to higher fuel prices.

"The underlying trend remains downwards, but, in the circumstances, inflation is now expected to converge to the medium term objective range in the first half of 2013," the bank said in a statement after a meeting of its Monetary Policy Committee.

That forecast, however, could be affected by unanticipated increases in administered prices, higher global food prices, a likely fall in international oil prices and weaker global activity, the bank said.

The bank said global inflationary pressures had eased and persistent capacity under-utilisation and high unemployment in major countries should have a moderating effect on global inflation.

Botswana's economic output expanded by an annual rate of 8.7 percent in June, with non-mining output up by 12.1 percent while mining output fell 8 percent, the bank said.

In the second quarter, Gross Domestic Product grew by 8.4 percent from the same 2011 quarter, up from a rate of 6.7 percent in the first quarter.

But the bank expects non-mining output to remain below potential in the medium-term, reducing inflationary pressures, and domestic demand is also expected to be subdued.

Botswana's central bank last changed its bank rate in November 2010 when it cut the rate by 50 basis points.

Company: Botswana

Full company nameBotswana
Country of riskBotswana
Country of registrationBotswana

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