Bloomberg News

Botswana’s Central Bank Keeps Benchmark Rate Unchanged

October 17, 2011

(Updates with comment from central bank starting in fourth paragraph.)

Oct. 17 (Bloomberg) -- Botswana’s central bank kept its benchmark interest rate unchanged for a fifth consecutive meeting, forecasting that the inflation rate will drop inside its 3 percent to 6 percent target range next year.

The lending rate was left at 9.5 percent, the Gaborone- based bank said in an e-mailed statement today. The bank last cut the rate by half a percentage point on Dec. 16.

Inflation, which reached 8.6 percent in September, may remain above the central bank’s target in the “short term” because of higher fuel prices, rising public transport costs and faster inflation in neighboring South Africa, the bank said. Low domestic demand will help to moderate price pressures, with inflation expected to ease into the target range by the second half of 2012, it said.

“The current state of the economy and the assumptions on both the domestic and external economic outlook, as well as the inflation forecast, suggest that maintaining the prevailing level of interest rates is consistent with the achievement of the bank’s 3 percent to 6 percent inflation objective in the medium term,” the bank said.

The economy of Botswana, the world’s biggest diamond producer, expanded 12.4 percent in the second quarter after mining output surged 23.7 percent and non-mining production rose 7.4 percent, the central bank said.

“Going forward, it is expected that non-mining gross domestic product will remain below potential in the medium term and will, therefore, contribute to moderate pressures on inflation,” the bank said.

The Bank of Botswana, led by Governor Linah Mohohlo, pegs the pula against a basket of currencies that includes South Africa’s rand and the euro. The pula has declined 11 percent against the dollar this year and was trading at 7.25163 as of 6:10 p.m. in Gaborone.

--Editors: Karl Maier, Gordon Bell

To contact the reporter on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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