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Bank of Botswana holds bank rate steady at 5%

MBONGENI MGUNI
Bank of Botswana governor, Moses Pelaelo
The Bank of Botswana this morning maintained the bank rate at 5%, continuing its push to boost economic activity through accommodative interest rates.

At that level, the bank rate is the lowest on record, according to the central bank’s published data, which dates back to 2004.

The bank rate is the benchmark against which all other interest rates, such as lending and deposit rates, are pegged in the market. For consumers, a review of the bank rate means either cheaper or more expensive loans and loan repayments.

The central bank’s Monetary Policy Committee (MPC) meets roughly every two months and makes a decision on the bank rate based on inflation projections as well as domestic and international economic forecasts.

This morning, central bank governor, Moses Pelaelo told journalists that subdued domestic demand pressures and benign threats of foreign inflation were behind the decision to maintain the bank rate at its current level. 

 “This outlook is subject to upside

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risks emanating from the potential rise in administered prices, commodity prices and government levies and, or taxes beyond current forecasts,” he said after a meeting of the MPC.

“However, restrained global economic activity, technological progress and productivity improvement present downside risks to the outlook.”

An additional threat to the inflation outlook comes from President Donald Trump’s protectionist policies which have sparked fears of an all-out trade war with other major economies.

This week, the South African Rand fell by 1.7% to the US dollar, as trade war fears pushed investors out of emerging markets to the safety of the US dollar.

The Pula’s value is currently determined by movements in a currency basket which carries a 50/50 weighting between the Rand and the Special Drawing Rights currencies, which include the US dollar.



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