The Monetary Policy Committee (MPC) of the Reserve Rank announced on Friday its decision to once again maintain the bank’s key rate at 7.5 percent citing a favourable inflation outlook.
Since the beginning of 2013, the MPC cut its rate four times by 50 basis points (0.50 percent) each time in May, June, August and lately in mid-December. Overall, this reduced the Bank rate to 7.5 percent from 9.5 percent since the previous rate cut in December 2010.
Bank of Botswana Communications Manager, Andrew Sesinyi says the Reserve Banks’ Friday Monetary Policy Committee meeting, just like the previous one, concluded that the medium term outlook was positive, with inflation forecast to remain within the 3-6 percent objective.
“The current state of the economy, domestic and external economic prospects, and the inflation outlook, suggest that the current monetary policy stance is consistent with maintaining inflation within the Bank’s 3-6 percent objective in the medium term. Accordingly, the Monetary Policy Committee decided to maintain the Bank Rate at 7.5 percent,” Sesinyi said in a statement released on Friday.
Domestic inflation fell within the Bank’s objective range of 3-6 percent in 2013 in the context of modest demand and the absence of upward pressures from changes in administered prices.
Available data shows that the average national inflation rate decreased from 8.5 percent in 2011 to 7.5 percent by the end of 2012. Last year further steady progress was recorded, with inflation dropping to 4.8 percent as of October 2013.
In January this year, the annual rate of the domestic inflation slightly went up by 0.3 of a percentage point from 4.1 percent in December last year to 4.4 percent.
Latest data released last week shows that headline inflation fell from 4.6 percent in February 2014 to 4.4 percent in March.
Inflation eased with respect to; food and non-alcoholic beverages (from 3.5 to 3.2 percent); alcoholic beverages and tobacco (from 10.5 to 9.5 percent); and transport (from 1.9 to 1.1 percent).
The bank noted on its Monetary Policy Statement for the year 2014 that its formulation and implementation of monetary policy will focus on entrenching expectations of low and sustainable inflation in the medium term, through timely responses to price developments, while ensuring that credit and other market developments are consistent with lasting stability of the financial system.
“The Bank remains committed to responding appropriately to all economic and financial developments with a view to ensuring price stability, financial stability and sustainable economic growth”.
In Friday’s statement, the central bank further noted that it expects the domestic inflation to remain below the objective range of 3-6 percent in 2014 and into the medium term.