Botswana's central bank lowered the monetary policy rate (MoPR) by 25 basis points on Thursday, reducing it from 2.4% to 2.15%.

The Bank of Botswana (BoB) explained that this decision was made after noting that the economy is expected to function below full capacity in the short term and is unlikely to produce demand-driven inflationary pressures.

“The current state of the economy and the outlook for both domestic and external economic activity provide scope to ease monetary policy. Accordingly, we decided to decrease MoPR to 2.15%,” said BoB Governor Cornelius Dekop when addressing journalists in Gaborone.

Dekop added that the risks to the inflation trajectory were considered balanced. Inflation is expected to remain low yet within the central bank's target range of 3% to 6% in the medium term, with an average of 3.6% in 2024 and 4.5% in 2025, Xinhua news agency reports.

However, the Bank of Botswana cautioned that inflation could exceed forecasts if international commodity prices rise beyond current expectations, supply and logistical constraints continue, or geo-economic fragmentation intensifies. 

Additionally, inflation may increase due to potential upward adjustments in government-controlled prices not included in the current projection and any rise in domestic food prices resulting from the El Nino-induced drought conditions in Southern Africa.

“These upside risks are likely to be offset by the possibility of a weaker domestic and global economic activity, as well as any decrease in international commodity prices,” Dekop went on to add.