Botswana's central bank kept its benchmark Bank Rate at 5.0 percent, citing a positive outlook for price stability due to "subdued domestic demand pressures and the modest increase in foreign prices."
The Bank of Botswana (BB), which in October cut its rate by 50 basis points on decelerating inflation, added the current state of the economy and the outlook for both domestic and external economic activity is consistent with keeping inflation within the bank's target range of 3.0 to 6.0 percent in the medium term.
Botswana's inflation rate eased to 2.9 percent in November from 3.0 percent in October, continuing the downward trend since hitting 3.5 percent in May and June.
BB said the inflation outlook is subject to downside risks from "sluggish global economic activity and the potential fall in commodity prices," while upside risks stem from an unexpected increase in administered prices, government levies or taxes and any rise in international commodity prices beyond current forecasts.
Botswana's economy grew by 3.1 percent in the 12 months to June compared with contraction of 0.7 percent in the same 2016 period, with Gross Domestic Product in the second quarter up by an annual rate of 1.0 percent, up from 0.8 percent in the first quarter.
Non-mining activity rose 4.9 percent in the year until June, up from 3.3 percent last year while output in the mining sector contracted by 10.1 percent, better than a 22.9 percent contraction in the same 2016 period.
Botswana's economy grew by 4.3 percent in 2016, up from contraction of 1.7 percent in 2015 as diamond sales rebounded and easy fiscal and monetary policies supported activity.
Although non-mining output is expected to remain below trend in the short-to-medium term from modest growth in household incomes, BB still expects a gradual economic recovery in the medium term from stronger external growth.
Botswana's pula has been trending higher since January 2016 and was trading at 10.06 to the U.S. dollar today, up 6.2 percent this year.
