BoB leans towards ‘looser’ interest rate policy

Setting trends: Dekop PIC.PHATSIMO KAPENG
Setting trends: Dekop PIC.PHATSIMO KAPENG

The Bank of Botswana (BoB) will continue with its accommodative monetary policy stance this year, which suggests that it will seek space to reduce interest rates in order to boost economic activity.

The accommodative monetary policy stance is made possible by the Bank’s projections that inflation this year will trend either below or within the three to six percent objective range.

“Inflation is expected to remain within the medium-term objective range and inflation expectations are well-anchored, while the economy is expected to operate below capacity in the short term,” governor, Cornelius Dekop said yesterday morning.

The three to six percent objective is considered the range within which inflation is both within reach of households and also supportive of healthy growth of businesses. Local inflation has been trending below three percent since September last year, due largely to declining fuel prices.


The central bank expects inflation to remain below three percent through to the second half of this year, before rising to peak at just over five percent in the late fourth quarter.

Under the accommodative monetary policy stance, the BoB decreased interest rates by 50 basis points last year, noting that benign inflation provided scope to support economic activity.

Dekop was speaking at the Monetary Policy Statement launch, an annual event where the central bank announces the position it will take with regard to interest rates, while updating on its outlook for the year.

Traditionally, the central bank can adopt an austere policy stance, where it looks for opportunities to raise interest rates or an accommodative stance where it leans towards cutting rates. The bank can also adopt a neutral stance where it neither seeks to lift or cut interest rates.

The central bank has generally maintained an accommodative monetary policy stance for years, only breaking the trend briefly in 2022 when 14-year high inflation forced interest rate hikes of 151 basis points.

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