BoB looks to soften monetary policy stance
Mbongeni Mguni | Wednesday February 25, 2026 14:45
This stance is made possible by expectations that inflation will remain within the three to six percent range this year.
Presenting the 2026 Monetary Policy Statement earlier today, central bank governor, Lesego Moseki, hinted that banks were required to align their lending rates to the Bank of Botswana’s interest rate trajectory.
“Given that monetary policy is accommodative and banks are directed to be in alignment with respect to lending interest rates, immediate implementation of transformation initiatives and structural reforms are expected to raise prospects for faster growth and economic diversification,” he said.
Last year, banks uncoupled from the BoB’s interest rate regime, moving their prime lending rates from 6.01 percent to 7.19 percent over several months. The central bank, meanwhile, maintained its benchmark Monetary Policy Rate at 1.9 percent, before adjusting to 3.5 percent in the second half of the year, as part of a “recalibration” to guide the banks.
The main driver of the changes was a liquidity crunch in the financial sector, which drove up deposit rates, forcing banks to adjust their lending rates.
The accommodative stance announced by the BoB will only be possible should inflation remain within the ranges forecast for the year. In December, the BoB said it expected inflation to peak at 6.2 percent in the third quarter, but this morning, Moseki revised this down to just over five percent.
The BoB maintains an inflation objective range of three to six percent, which is seen as a health price growth threshold for the economy.
The central bank said there were however high risks of inflation rising beyond the forecast due to the BPC proposal for tariffs, planned public transport hikes, the impact of Foot and Mouth Disease as well as the reduction of VAT zero-rates goods/services.