Botswana's central bank kept its Bank Rate unchanged at 5.50 percent, saying its "supportive monetary policy stance remains consistent with maintaining inflation within the 3 - 6 percent objective range" based on the current state of the economy and the domestic and foreign outlook.
The Bank of Botswana (BB), which last cut its rate by 50 basis points in August 2016, added moderate domestic demand pressures and a modest rise in foreign prices contributed to a positive outlook for inflation, with downside risks from lower commodity prices and upside risks from higher administered prices and higher than expected commodity prices.
Botswana's inflation rate eased to 3.4 percent in July from 3.5 percent in the previous two months while the exchange rate of its pula continued to slowly appreciate after hitting lows around 12 to the U.S. dollar in January 2016.
The pula was trading at 10.2 to the dollar today, up almost 5 percent this year.
Botswana's economy grew by 3.9 percent in the 12 months to March, up from a contraction of 1.8 percent in the same period that ended March 2016, BB said.
After shrinking by 1.7 percent in 2015, Botswana's economy grew 4.3 percent last year as diamond sales rebounded and easy fiscal and monetary policies helped non-mining activities.
In the first quarter of this year, Botswana's Gross Domestic Product grew by an annual 0.8 percent, down from 4.2 percent in the previous quarter.
Higher economic activity is supported by the non-mining sector while the mining sector contracted by 10.3 percent in the year to March, BB said, adding non-mining output is projected to be below trend in the short to medium-term due to modest growth in household incomes and subdued economic expansion in trading partners.
"However, gradual economic recovery is expected in the medium term in response to anticipated improvement in external economic conditions," BB said.
Earlier this month the International Monetary Fund said Botswana's economy was undergoing a cyclical recovery with a broadly positive outlook, supported by a rebound in the global diamond market and public investment, and appropriate macroeconomic policies.
"At present, the authorities' neutral monetary policy stance is appropriate as there does not seem to be room to lower interest rates," the IMF said, adding the exchange rate regime continued to serve the country well.
The IMF forecast growth this year of 4.5 percent and 4.8 percent in 2018, with inflation seen averaging 3.7 percent this year and next year.
