19 Jun 2013

Bank of Botswana (BoB) has reduced the bank rate to 8.5 per cent as the global and domestic inflation outlook remains positive.

As a result, commercial banks are expected to extend the decrease to consumers by subsequently lowering their lending rates.

A statement from the central bank stated that the current state of the economy characterised by low output and high unemployment, provided an opportunity for non-inflationary stimulus to the economy.

Bank of Botswana said a more accommodative monetary policy stance was consistant with the achievement of its three to six per cent inflation objective in the medium term. Meanwhile, it was stated that the global economy was projected to expand by 3.3 per cent, up from an estimate of 3.2 per cent in 2012.

Economic growth in emerging markets continued to be stronger but growing at a slower rate. The central bank stated that the lower global growth, subdued demand and stable commodity prices had contributed moderate inflationary pressures.

Domestic output increased by 3.7 per cent in the 12 months to December 2012, with growth in the non-mining sector slowing to 5.8 per cent in 2011 from 7.8 per cent growth registered the previous year.

Output expansion was expected to remain below potential in the medium term and wouldl not be inflationary. It was further anticipated that the impact of demand on economic activity would be modest, partly reflecting trends in government expenditure and personal incomes.

Meanwhile, May inflation eased to 6.1 per cent from 7.2 mainly due to base effects related to the May 2012 increase in administered prices, when inflation was 7.7 per cent. ENDS