Inflation cools in line with BoB forecasts

Consumer inflation has softened to sit at the lower end of the Bank of Botswana (BoB) objective, in line with forecasts that informed last month’s cut in the benchmark bank rate.

Figures published by Statistics Botswana (SB) yesterday show that annual inflation rate in October 2017 was 3.0%, registering a drop of 0.2 of a percentage point on the September 2017 rate of 3.2%. At 3.0% consumer inflation is now at a ten-month low.

The BoB’s medium term objective is to have consumer inflation in the three to six percent range.

SB says group indices were generally moving at a steady pace between September and October 2017, recording changes of less than 0.5%.


“The Restaurants & Hotels group index went up from 103.7 to 104.0, recording a rise of 0.2% between the two months. This was due to a general increase in the constituent section indices,” said the statistics agency.

Anticipating inflation to ease in the short term, the BoB last month cut the main bank rate by 50 basis points to five percent, the lowest in recorded history.

The rate cut was the first since August 2016.

Governor Moses Pelaelo said inflation was projected to remain within the three to six percent target within the medium term, with upward risks identified any substantial unanticipated upward adjustment in administered prices and government levies and/or taxes.

The BoB has been easing monetary policy in the last few years in a bid to encourage productive lending by commercial banks, but there has not been a matching increase in credit growth. 

Economist Keith Jefferis said he does not see the latest rate cut triggering a significant response to credit growth.

“Most households are already over borrowed so there is little room for them to increase debts from banks.

Besides, households never really consider the level of interest rates when taking up credit. If there is going to be any increase in credit growth, it would probably come from corporate lending, which has been on the rise anyway, in 2017,” he said.

cess to finance.

 

The overall objective of the programme was to contribute to economic growth, employment creation and diversification of Botswana economy.

Under the PSDP, the EU has interacted with different sectors across the economy to find ways of developing them. The programme has assisted the SMMEs in improving their competitiveness, assistance with access to finance as well as markets.

Editor's Comment
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