GABORONE (Reuters) – Botswana Central Bank indicated a likely hike in interest rates at Thursday’s first Monetary Policy Committee meeting of the year after reporting inflation running at a 13-year high in January.
Governor Moses Pelaelo said the medium-term outlook remained favourable, with inflation expected to fall back within the 3-6% objective range in the third quarter, but there was a need to respond to short-term price rises.
Botswana, whose economy is led by diamond mining, posted 10.6% inflation in January, which the governor called “worryingly high”.
Most of last year, central banks globally were dismissive of inflation as a transitory phenomenon, but with rising prices of crude oil and other commodities and logjams at various major ports, most countries have now acknowledged that inflation is here to stay.
Inflation in Botswana was also due to hikes in local value-added tax, government levies and other administered prices since April.
But Pelaelo maintained an accommodative stance throughout last year, holding the policy rate at 3.75%.
“Given the significant upside risks to the inflation outlook in the short-term and possibility of elevated inflation expectations, the policy posture may need to be calibrated to respond, in an appropriate, timely and measured manner, to price developments in 2022,” Pelaelo said.
If the central bank decides to increase the policy rate, it would be the first hike in 14 years and the country will be following the lead of southern African neighbours including South Africa, Namibia and Zambia.
(Reporting by Brian Benza; Editing by Promit Mukherjee and Nick Macfie)
