The Monetary Policy Committee (MPC) of the Bank of Botswana maintained the Monetary Policy Rate (MoPR) at 2.65 percent.
During the media brief, the Bank of Botswana’s Governor Mr. Moses D. Pelaelo announced that due to the dissipating impact of administered prices, the economy will operate below full capacity in the short-to-medium term and, therefore, not generate demand-driven inflationary pressures. The inflation is projected to trend downwards and revert to the objective range in the medium term. Hence, the MPC decided to maintain the MoPR at 2.65 percent.
Inflation decreased from an average of 12.6 percent in the fourth quarter of 2022 to an average of 9.4 percent in the first quarter of 2023 but remained above the Bank’s medium-term objective range of 3 – 6 percent.
The decrease in inflation is due to the base effects associated with the increase in administered prices in the corresponding period in 2022 as well as the impact of the downward adjustment of domestic fuel prices in the first quarter of 2023.
Inflation could be higher than projected because of the likelihood of an increase in international commodity prices beyond current forecasts, persistence of supply and 2 logistical constraints, as well as reversal of global economic integration (geoeconomic fragmentation) that may lead to higher inflation.
Domestically, the risks of higher inflation include possible adjustment in administered prices that are not factored in the current projection; entrenched expectations for higher inflation; any realized upward pressure on wages; and any, overshooting of prices beyond what is consistent with the reversion of value added tax to 14 percent effective April 1, 2023.
These risks are, however, moderated by the possibility of weak domestic and global economic activity; possible disinflationary effects of tighter monetary policy globally; as well as restrained international commodity prices.
“Accordingly, the 7-day Bank of Botswana Certificates including repos and reverse repos will be conducted at the MoPR of 2.65 percent; the Standing Deposit Facility (SDF) Rate is maintained at 1.65 percent, 100 basis points below the MoPR; and the Standing Credit Facility (SCF) Rate remains at 3.65 percent, 100 basis points above the MoPR,” said the Bank of Botswana’s Governor, Mr. Moses D. Pelaelo.
