GABORONE (Reuters) – Botswana’s central bank on Thursday raised its main lending rate, saying it now expected inflation to fall back within its target range of 3%-6% only in the first quarter of 2023 compared to a previous forecast of the third quarter of 2022.
“We still believe the high inflation is transitory as it is driven by supply-side factors. … The decision to increase interest rates today is therefore to tame expectations,” said central bank official Lesedi Senatla.
The Bank of Botswana raised its Monetary Policy Rate based on a 7-day instrument by 51 basis points from 1.14% to 1.65%. Previously the bank used an annual rate called the Bank Rate when setting monetary policy.
“The new policy rate is a signalling rate showing (the) direction in which interest rates must move. Commercial banks will now be expected to adjust their prime rate by 51 basis points,” the bank’s Governor Moses Pelaelo said.
Botswana’s consumer inflation was at 10% year on year in March.
(Reporting by Brian Benza; Writing by Bhargav Acharya; Editing by Alexander Winning)
