The Monetary Policy Committee (MPC) of the central bank will meet on Thursday to decide amongst other things the bank’s benchmark interest rate. The MPC holds six pre-scheduled meetings per year, at which the monetary policy stance is determined. At the last meeting, held on 20th August 2020, the MPC decided to keep the bank rate at 4.25 percent, after it was slashed by 50 basis points from 4.75 percent five months ago.
“The MPC, however, recognised that the short-term adverse developments in the domestic economy occur against a potentially supportive environment including accommodative monetary conditions”, said Central bank governor Moses Pelaelo in August 2020 during a virtual press conference with journalists following the fourth MPC meeting.
The central bank is responsible for among other things to determine the level at which commercial banks lend out money to households and businesses.
Currently Botswana’s monetary policy is being implemented in the context of prospects for low inflation in the medium term, associated with subdued domestic demand resulting from the adverse effects of the COVID-19 disease containment measures, which have throttled domestic and external economic activity.
Consumer inflation in Botswana – which has been core to MPC’s interest rate decisions has remained stubbornly low, sparking debate over the effectiveness of the central bank’s accommodative policy in stimulating domestic demand and jumpstarting the economy.
In mid-September, First National Bank Botswana (FNBB) Chief Economist – Moatlhodi Sebabole made a prediction that the Bank of Botswana will make one last cut to its benchmark rate before the end of the year.
“Interest Rate could move lower to 3.75 percent before the end of the year”, said Sebabole.
FNBB also said that it expects inflation to average 1.9 percent in 2020 further supported by low Brent Crude oil prices.