"Given the pressures from imported inflation, combined with the recent increase in local fuel prices and rising concern over food prices, our inflation outlook remains troubled," Maungo Lebanna, an analyst with the asset management company, said in a commentary to Monitor Business. The Ministry of Minerals, Energy and Water Resources recently raised the price of petrol by 25 thebe, diesel by 20 thebe and paraffin by 20 thebe, raising fears of a less festive Christmas holiday. "We therefore expect a further acceleration in headline inflation into the second quarter of 2008," Lebanna said.
Although he said he still expected interest rates to remain on hold into the first half of 2008, Investec forecast that headline inflation would peak at eight percent (8%) by February 2008, and later descend into the 4 to 7 percent target band by the end of the second quarter. The October Consumer Price Index (CPI) jumped from 6.8 percent in September to 7.3 percent in October, pushing inflation outside the 4 to 7 percent target band set by the Bank of Botswana (BoB). The increase was driven by a rise in the food and transport category, both of which constitute about 41 percent of the CPI basket. Tradable goods inflation is also likely to remain high because of rising goods prices, primarily from South Africa.
