Botswana's central bank left its Bank Rate steady at 5.5 percent as "the prevailing monetary policy stance is consistent with maintaining inflation within the Bank's medium-term objective range of 3 - 6 percent."
Bank Botswana (BB), which cut its rate by 50 basis points in August, added that "subdued domestic demand pressures and benign foreign price developments contribute to the positive inflation outlook in the medium term."
Botswana's inflation rate rose slightly to 2.8 percent in September from a historic low of 2.6 percent in August, with the central bank saying that it inflation outlook is subject to downside risks from sluggish global economic activity and the resultant low commodity prices.
On the other hand, inflation could also be affected by unexpectedly large rises in administrative prices and government levies along with higher-than-expected global food and oil prices.
In its August midterm review, BB forecast that inflation would remain low and stable in line with its objective, with implementation of monetary policy focused on entrenching expectations of low and sustainable inflation through timely responses to price developments.
Botswana's inflationary pressures are likely to remain restrained by low inflation in its trading partners apart from in South Africa where inflation is seen averaging 6.6 percent this year and remaining above the upper end of the central bank's target range for the rest of this year.
The relative strength of Botswana's pula against South Africa's rand should help moderate imported inflation, BB said in August.
BB's exchange rate policy entails a 0.38 percent upward rate of crawl for the nominal effective exchange rate for the rest of this year.
The pula, which had been depreciating steadily against the U.S. dollar since August 2011, has rebounded since hitting 12 to the dollar on Jan 20 this year. Today the pula was trading at 10.8 to the dollar, up 4.6 percent since the start of 2016.
Botswana's Gross Domestic Product contracted by 1.3 percent in the second quarter from the first quarter due to lower mining output. On an annual basis, GDP grew 1.6 percent, down from 2.7 percent in the first quarter.
