Africa-Press – Botswana. While central bankers and financial analysts agree that inflation will remain within the 3 – 6 percent object range of the Bank of Botswana into the last quarter of the year, consumers should not expect to enjoy any cut in the Monetary Policy Rate (MoPR), at least one investment analyst has said.
Kitso Mokhurutshe, who crunches his numbers at Kgori Capital, says despite the recent fall in the inflation rate, the Monetary Policy Committee of the central bank will not be tempted to tempter with its key interest rate (MoPR).
At its last sitting, which was on the 15th of June 2013, the MPC decided to maintain MoPR at the current rate of 2.65 percent. This was the MPC’s third meeting since the beginning of the year with all other meetings resulting in a ‘hold’ decision for the MoPR.
“Following the significant decline in inflation in May, the MPC did not make any changes to the MoPR during their June sitting. We do not expect any changes to the MoPR during 2023”, says Mokhurutshe.
Mokhurutshe says there is a real possibility that consumer inflation could drop below the BoB’s 3 percent lower bound in the third quarter of 2023 (Q3:2023) due to strong base effects.
He also adds that the recent fuel price reductions have resulted in notable changes to Kgori Capital’s inflation forecast. As per the new forecast, the month of July is expected to see inflation dropping below the lower bound of 3 percent due to the fuel price adjustments coming into effect.
The Bank of Botswana governor, Moses Pelaelo on the other hand recently told financial journalists that the decision to maintain the key benchmark rate was reached after observing the trends in inflation, both globally and domestically. Pelaelo said at the moment, the central bank does not anticipate a demand-driven inflationary pressure but rather elevated inflation in the short term, primarily due to supply-side factors and related second-round effects and entrenched expectations.
Pelaelo said due to the bank’s projection on the domestic economy, which he said will operate below full capacity in the short to medium term, the MPC decided to maintain the MoPR at 2.65 percent to support the nascent economic recovery.
Official data shows that Botswana’s real Gross Domestic Product (GDP) increased by 5.8 percent in 2022, lower than the 11.9 percent recorded in 2021. At the same, the Ministry of Finance projects GDP to grow by 4 and 5.1 percent in 2023 and 2024, respectively.
“The MPC projects that, in addition to the dissipating impact of administered prices, the economy will operate below full capacity in the short term and, therefore, not generate demand-driven inflationary pressures. Thus, inflation is forecast to remain within the objective range into the medium term”, Pelaelo said.
Pelaelo also said that the risk for higher inflation in Botswana relates to, among others, possible annual price adjustments in administered prices that are not factored in the current projection.
Botswana’s annual inflation rate reached 5.7 percent during May according to data shared by Statistics Botswana recently.
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