The Monetary Policy Committee said Friday that it was mindful of the current state of the economy, domestic and external economic prospects as well as the inflation outlook when deciding to leave the bank rate unchanged. The MPC left the bank rate at 7.5 percent at its meeting held Friday morning.
The bank says inflationary outlook suggest that the current monetary policy stance is consistent with maintaining inflation within the Bank’s 3 ÔÇô 6 percent objective in the medium term.
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.
Documented data shows that 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.
The rate of domestic inflation went up slightly by 0.1 of a percentage point on the July 2014 rate of 4.5 percent, the Consumer Price Index (CPI) data released by Statistics Botswana two weeks back shows.
The Bank of Botswana note 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”.
Both financial analysts and the central bank forecast that the domestic inflation will remain below the objective range of 3 ÔÇô 6 percent in 2014 and into the medium term.
Meanwhile the bank stated in the Friday statement that Botswana’s overall output growth is estimated at 5.9 percent in the twelve months to March 2014, due to the 14.2 percent and 4.6 percent increase in mining and non-mining output, respectively.
“It is anticipated that non-mining economic activity will remain below potential in the short term, albeit with a closing output gap in the medium term, thus implying modest domestic demand pressures on inflation going forward. The impact of domestic demand on economic activity in the short term is in the context of sluggish growth in personal incomes.”