Botswana’s central bank has cut its benchmark interest rate for the first time in two years to the lowest level since at least 2007, as it seeks to boost economic growth.
The Monetary Policy Committee reduced the rate by a quarter percentage point to 4.75%, Governor Moses Pelaelo told reporters Thursday in the capital, Gaborone. That’s the first cut since October 2017, when the central bank reduced it by 50 basis points. Inflation is seen remaining weak given subdued demand pressures in the economy.
“Accommodative monetary policy” should help the economy expand an estimated 4.2% this year and 4.4% in 2020 Pelaelo said. Consumer inflation was 2.9% in July, below the central bank’s 3% to 6% target range. It hasn’t breached the upper end of the band since at least 2014. Botswana imports much of its goods from neighbour South Africa, where inflation eased to 4% in July.
“We believe price stability has been achieved,” Tshokologo Kganetsano, the central bank’s Director for Research and an MPC member, said.
“We expect inflation to remain within that range and the decision to cut the rate is to promote economic activity.”