Economic Analysis - Low Inflation Will Prompt Further Rate Cuts - 24 JULY 2017

BMI View : Inflation will remain close to the bottom of Botswana ' s inflation target band over the coming months, as low fuel and food prices temper the country ' s consumer basket. This will see the central bank persevere with loose monetary policy through to 2019.

Inflation will likely remain subdued in Botswana over the coming months, gravitating towards the lower end of the central bank's 3.0-6.0% target band. A combination of both low food and fuel prices will see the country's consumer basket remain stable over our short-term outlook. With inflation erring towards the lower end of target, the central bank will look to stimulate the underperforming economy by cutting interest rates in a bid to boost credit growth that has struggled to break out of a steady decline since peaking in 2012. We forecast a further 50 basis points (bps) of cuts by the Bank of Botswana (BoB) before year-end 2017, leaving rates at 5.00% before the persistence of low oil prices in 2018 facilitates a further 100bps in cuts.

Lacklustre Commodities Dampen Inflation Outlook

Positive Real Rate Leave Room For Cuts
Botswana - Inflation & Interest Rates
Source: BoB, BMI

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