Thursday, October 1, 2020

Inflation slides closer to central bank target

The national year-on-year inflation skidded by over one percent point to move closer to the central bank target during the month of June, brightening prospects that the cost of borrowing might ease in the long term.

According to the central statistic office, figures on Thursday inflation slouched-down 1.4 percent points during the period under review to 7 percent against the May figure of 8.4 percentage points.

The central bank has given itself a task of bringing inflation within a target band of three — toÔÇösix percent over a long period.

“Generally, the forecast is that inflation will fall within the Bank of Botswana’s target by the end of the year.

“And if you look at things on a global scale it is like that is likely to be fulfilled given that crude oil price are stable,” head of Capital Asset Management, Leutlwetse Tumelo, said.
The international crude oil prices have come down from a month ago when there was a temporary spike in prices which ultimately died-out.

According to the CSO figures, inflation figures were largely dragged down by the rural villages and urban village which went down by 1.5 and 1.4 percent, respectively.

Embolden by the falling inflation rate, bank of Botswana recently slashed bank rate to 11.5 percent in a move aimed at stimulating borrowing ÔÇô especially by the corporate sector ÔÇô in the economy.
The latest move is likely to see the bank’s monetary policy committee slashing the bank rate to closer to 10 percent when it meets in the next week after the last one.

The Thursday figures by CSO showed that the national Consumer Price Index stood at 128.2, registering an increase of 1.4 percent on the May index of 126.4. The cities and towns’ index moved from 124.0 to 126.3 between May and June, an increase of 1.8 percent.

The urban villages’ index went up by 1.3 percent – from 126.3 to 128.0 between the two months, while the rural villages’ index rose from 132.5 in May to 133.5 in June, recording an increase of 0.8 percent.

Five group indices recorded a change of at least 1.0 percent between May and June ÔÇô Transport (5.9 percent), Restaurants & Hotels (1.8 percent), Furnishing, Household Equipment & Maintenance (1.5 percent), Housing, Water, Electricity, Gas & Other Fuels (1.0 percent) and Miscellaneous Goods & Services (1.0 percent).

The Transport group index increased by 5.9 percent ÔÇô from 108.8 to 115.2 between the two periods.

This was largely due to an increase in the constituent section indices of Operation of Personal Transport and Purchase of vehicles which rose by 7.6 and 5.6 percent, respectively.

The increase in Operation of Personal Transport section index was attributed to the rise in retail pump prices for both petrol and diesel by P0.56 and P0.55 per litre respectively, which were effected on June 12, 2009. The rise in the Purchase of Vehicles section index was mainly due to a general increase in the prices of motor vehicles.

Imported Tradeables inflation rate recorded a drop of 1.3 percentage points between May and June, from 1.7 to 0.4 percent.

The Domestic Tradeables inflation rate went down from 19.9 percent in May to 18.0 percent in June, while the Non-Tradeables inflation rate decreased from 8.8 percent in May to 8.0 in June. The All ÔÇôTradeables inflation rate registered a drop of 1.6 percentage points, down from 8.1 percent in May to 6.5 percent in June.

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