Bank of Botswana Holds Monetary Policy Rate at 5.5%

The Bank of Botswana’s Monetary Policy Committee unanimously held the Monetary Policy Rate at 5.5%, balancing above-target inflation against subdued growth, following transmission-focused recalibrations of 160 basis points to 3.5% in October 2025 and 200 basis points in April 2026. It retained its standing deposit and credit facility rates and will continue certificate auctions, repos and reverse repos at the policy rate. The committee also lifted the moratorium on commercial banks’ prime lending rates, expecting improved liquidity and moderating funding costs to support lower lending rates. Headline inflation fell to 7.8% in September 2026, mainly reflecting fuel-price base effects, but remained above the 3–6% medium-term objective range. Inflation is expected to return within that range in the second quarter of 2027, although risks remain tilted upward from fuel and electricity costs, potential second-round effects and climate shocks. Real output grew 3.7% in the twelve months to June 2026, supported by mining, but overall economic performance remained weak. Domestic liquidity improved, moderating funding costs, while the committee said earlier policy measures had supported foreign-exchange market stability. Globally, the Middle East conflict, elevated commodity prices and trade uncertainty threaten to sustain inflation pressures and undermine the diamond-market recovery. The central bank signalled a data-driven stance supporting economic activity while managing inflation e