The Bank of Botswana Monetary Policy Committee (MPC) sitting on Monday decided to leave the benchmark rate at the current levels of 5.5 percent saying outlook for price stability remains positive.
Inflation increased from the historically low level of 2.6 percent in August to 2.8 percent in September 2016.
The meeting of the Monetary Policy Committee held on October 17, 2016 concluded that the outlook for price stability remains positive, with the forecast pointing to inflation being close to the lower end of the 3 ÔÇô 6 percent objective range in the medium term.
At the same time, the BoB committee stated that the current state of the domestic economy and both the domestic and external economic outlook, including the inflation forecast, suggest that the prevailing monetary policy stance is consistent with maintaining inflation within the Bank’s medium-term objective range of 3 – 6 percent.
Official data from statistics Botswana shows that the country’s real GDP is estimated to have contracted by 0.3 percent in the twelve months to June 2016, compared to growth of 3.1 percent in June 2015, thus reflecting the decline of 23 percent in mining production. Non-mining output increased by 4 percent. Inflation increased from the historically low level of 2.6 percent in August to 2.8 percent in September 2016.
“In the circumstances, the Monetary Policy Committee decided to maintain the Bank Rate at 5.5 percent. Monetary policy is also aligned with the need to safeguard financial stability. In this respect, credit growth is considered to be at a sustainable level; it is posing no threat to financial stability”, reads part of the statement released by the MPC on Monday.
Available figures show that in 2015, the Bank Rate was reduced by a cumulative 1.5 percentage points from 7.5 percent to 6 percent during the year. BoB noted in its 2015 annual report that the monetary policy was conducted in the context of a positive medium throughout the year due to modest domestic demand, reasonable upward adjustment in administered prices and in order to support economic growth.
For 2016, however, the economic performance across the world remains uneven, with challenges relating to economic restructuring in both developed and emerging market economies. In addition, uncertainty arising from the June 2016 decision by the United Kingdom to leave the European Union could further constrain medium-term growth prospects.