21 Oct 2015

The Bank of Botswana (BoB) has maintained a six per cent bank rate citing favourable inflation climate and economic outlook. 

The bank states that the Monetary Policy Committee concluded that the medium-term outlook for price stability remains positive, with inflation forecast to be close to the lower bound of the three to six per cent medium term objective range.

Inflation eased from three per cent in August to 2.9 per cent, mainly due to the downward adjustment in domestic fuel prices.

“Low domestic demand pressures and subdued foreign price developments contribute to the positive inflation outlook in the medium term,” reads the press release from Bank of Botswana.

It says, however, this is subject to downside risks arising from the sluggish global economic activity and the resultant weakening commodity prices.

“The inflation outlook could be adversely affected by any anticipated large increase in administered prices and government levies as well as international oil and food prices beyond current forecasts,” the statement reads.

Talking about the economy, the Bank says the current state of the economy and both the domestic and external economic outlook, including the inflation forecast, suggest that the prevailing monetary policy stance is consistent with maintaining the medium term objective range of 3 – 6 per cent.

Low interest rate attracts credit but the Bank has said this does not pose threat to financial stability as it is considered to be at sustainable level.

Economic analysts have said they expect the monetary policy to remain accommodative due to the low inflation environment.