By CentralBankNews.info
Botswana’s central bank maintained its benchmark Bank Rate at 5.50 percent as “subdued domestic demand pressures and benign foreign price developments contribute to the positive inflation outlook in the medium term.”
Bank Botswana (BB), which cut its rate by 50 basis points in August, added the outlook was subject to downside risks from sluggish global economic activity and ow commodity prices while this could also be adversely affected by large rises in administered prices and government levies along with global food and oil prices in excess of forecasts.
BB targets inflation in a range of 3.0 to 6.0 percent and the inflation rate in October eased to 2.7 percent from 2.8 percent in September.
Gross Domestic Product grew by an annual rate of 1.6 percent in the second quarter, down from 2.7 percent in the first quarter due to a 23 percent drop in mining output. Non-mining output rose 4 percent, BB said.
The exchange rate of Botswana’s pula has been rising slowly the U.S. dollar this year and was trading at 10.6 to the dollar today, up 6.6 percent this year.
BB said in October that its exchange rate policy entails a 0.38 percent upward rate of crawl for the nominal effective exchange rate for the rest of this year.
This appreciation of the pula is in contrast to the period from August 2011 until January 2016 when the pula fell over 40 percent.
Bank Botswana issued the following statement:
“The meeting of the Monetary Policy Committee held on December 13, 2016 concluded that the outlook for price stability remains positive, with the inflation forecast within the 3 – 6 percent objective range in the medium term. Global output is projected to grow by 3.1 percent in 2016, from 3.2 percent in 2015, and 3.4 percent in 2017. However, economic performance across the world remains uneven, with challenges relating to economic restructuring in both developed and emerging market economies. In addition, the medium-term growth prospects are uncertain as a result the June 2016 decision by the United Kingdom to leave the European Union and the likely changes in policy following the USA presidential election. In Botswana, real GDP is estimated to have contracted by 0.3 percent in the twelve months to June 2016, compared to growth of 3.1 percent in the year to June 2015, thus reflecting the decline of 23 percent in mining production. Non-mining output increased by 4 percent. Inflation fell slightly from 2.8 percent in September to 2.7 percent in October 2016. Subdued domestic demand pressures and benign foreign price developments contribute to the positive inflation outlook in the medium term. This outlook is subject to downside risks emanating from sluggish global economic activity and the resultant low commodity prices. It could, however, be adversely affected by any unanticipated large increase in administered prices and government levies as well as international oil and food prices beyond current forecasts. The current state of the economy and both the domestic and external economic outlook, including the inflation forecast, suggest that the prevailing monetary policy stance is consistent with maintaining inflation within the Bank’s medium-term objective range of 3 – 6 percent. In the circumstances, the Monetary Policy Committee decided to maintain the Bank Rate at 5.5 percent. Monetary policy is also aligned with the need to safeguard financial stability. In this regard, credit growth is considered to be at a sustainable level. “
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