Although a recent rally in crude oil prices is inflationary, Botswana inflation is expected to fall within the Central Bank’s set objectives in the coming months.
According to the Central Statistic Office (CSO) figures released last week, inflation slouched-down 1.4 percent points during the period under review to 7 percent against the May figure of 8.4 percentage points.
“Inflation is falling and that is good news. That is positive for the economy,” says Dr Keith Jefferis, Chairman of Bifm Investment Committee.
“That process will continue. We expect inflation to fall below 6 percent and settle in the range of 5 ÔÇô 7 percent,” added the former Bank of Botswana (BoB) deputy governor.
The expectation is that the Bank of Botswana Monetary Policy Committee will ease the monetary policy by cutting key interest rates to closer to 10 percent when it meets in the next weeks after the last one.
BoB recently slashed Bank Rate to by 150 basis points 11.5 percent in an effort to encourage borrowing as money has become cheaper for business to expand.
Jefferis agrees that the declining inflation enables BoB to ease the Monetary Policy that ‘will provide support firms and help support the economy through the recession’.
However, the former deputy governor at the Central Bank stated that cutting interest rates will not come fast.
“We expect BoB to keep rate cut on hold and see if inflation reaches target range,” he observed.
His argument was that the last time the Monetary Policy adjusted Bank Rate, it was steep.
Bank of Botswana has set a target of maintaining inflation rate at between 3 and 6 percent.
The target band has been eluding Linah Mohohlo’s charges because of a wide range of factors including imported inflation as Botswana is a net importer of almost everything.