Monday, May 23, 2022

Fuel price hike: BoB puts interest rates on hold

The Bank of Botswana Monetary Policy Committee (MPC) decided to leave the interest rate on hold awaiting the ripple effects of the fuel price expected to be felt within the next threeÔÇôtwo-four weeks.

The new developments are likely to evolve into some general price spike that will touch on general commodities while Standard Chartered is allegedly said to be fiddling with the foreign currency stuff.

While the central bank left rates on hold at 14.50 percent, insiders said that the decision is based on the likelihood of a general of price spike across sectors of the economy.
“There is a possible increase in fuel and administered prices in the fourth quarter of 2007 due to the oil prices which zipped past $96 per barrel disclosed this week in the United States, which is the world’s biggest energy consumer,” the central bank said last week.

The Central Statistic Office said consumer spending rose by 0.3 percent in September, beating the 0.4 percent increase analysts expected, and raising the prospect of a slowing US economy. If the US economy slowsÔÇôdown as envisaged, the general public would feel the pinch, because over 50 percent of the country’s diamonds are being bought there.

According to the Bank of Botswana statement, the last adjustment of the Bank Rate ÔÇô the rate at which central bank borrows local commercial banks ÔÇö decrease of half a percentage at the last reduction which was on June 18, 2007. Inflation fell within the Bank’s annual objective range in September, with several categories of goods and services recording lower annual rates of price increase.

Moreover, sustained high levels of growth in demand pressures are likely to exert upward pressure on inflation in the medium term. Against this background, the Bank considers it prudent to maintain the current monetary policy stance with the aim of sustaining the medium-term inflation path and expectations of low inflation.

America’s economy is also reported to be in a bad shape due to the US credit crisis which has also played a part in oil’s price rise, as investors look for a hedge against the weak greenback. It is also reported that the US economy has lost 2 million jobs. Despite this, Giles Keating, Head of Global Research for Credit Suisse, believes the global economy seems to be in reasonable balance and that there is no recession in sight.

Dr Keith Jeffries, an economic consultant, believes that since America is the largest buyer of Botswana Diamonds, diamonds sales are likely to be weak. Though there might be that fall, he said there are still other fast growing diamond markets like India, Europe and China which are not affected in the same way as the US.

Varda Shine, De Beers’s Diamond Trading Company’ chief executive officer said she will splash US $ 200 million before the end of the year to try to promote diamond sales across the world, most importantly the US.


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