BOB slashes interest rates

Cornelius Dekop.PIC.PHATSIMO KAPENG
Cornelius Dekop.PIC.PHATSIMO KAPENG

Bank of Botswana (BoB) said last week it took a decision to cut its benchmark lending rate in an attempt to induce economic activity.

According to the apex bank, at its sitting the BoB’s Monetary Policy Committee (MPC) decided to reduce the Monetary Policy Rate (MPR) by 25 basis points to 2.15%. The move means that borrowers on variable rate loans such as personal and credit card loans, will enjoy a decrease in their repayments. Equally, consumers intending to take up new loans will also enjoy the new lower interest rates. BOB as the country’s central bank is responsible for the wellbeing of the financial economy, mainly through the use of monetary instruments such as the MPR. The policies are often used to either induce economic activity or curb inflationary pressures in the economy.

The decision to reduce lower the MPR comes at the backdrop of contained inflationary pressures and a slow macroeconomic environment with the economy performing below full capacity. This means that the economy is not fully producing output at its potential. Delivering the decisions of the committee BoB Governor, Cornelius Dekop, said that inflation remained contained within the desired range of 3-6 percent and that risks to inflation remained balanced. This gave the committee a leg room to consider a downward adjustment of the MPR. “Inflation is forecast to remain low but within the objective range in the medium term, averaging 3.6 percent in 2024 and 4.5 percent in 2025. “Similarly, businesses also expect inflation to be within the medium-term objective range; thus, inflation expectations are aligned to the inflation objective (well anchored),” he revealed.

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