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Bank Of Botswana Monetary Policy Committee (MPC) Media Briefing Announced By Governor Cornelius Dekop

 

Press Release 
Monetary Policy Committee Meets 
December 7, 2023 
Monetary Policy Rate cut to 2.4 percent 
At the meeting held on December 7, 2023, the Monetary Policy Committee (MPC)  of the Bank of Botswana reduced the Monetary Policy Rate (MoPR) by 25 basis  points from 2.65 to 2.4 percent. 
INFLATION 
Headline inflation decreased slightly from 3.2 percent in September to 3.1 percent  in October 2023, remaining within the Bank’s medium-term objective range of 3 – 6  percent. The slight decrease in inflation was mainly due to a broad-based  deceleration in food price increases. Inflation is forecast at 3.9 percent for  November 2023. The slightly higher forecast inflation for November is mainly due  to base effects associated with the decrease in domestic fuel prices effected in 2022.  The MPC projects that, going forward, inflation will remain within the objective  range into the medium term. 
The MPC observes that inflation could be higher than projected if international  commodity prices increase beyond current forecasts, supply and logistical  constraints persist and the reversal of global economic integration (geo-economic  fragmentation) escalates. Furthermore, possible upward adjustment in prices  controlled by government (for example, electricity and water tariffs) that is not  factored in the current projection and any increase in domestic food prices due to 
the projected El Niño conditions in Southern Africa may lead to higher inflation.  However, inflation could be lower than currently anticipated because of the  possibility of weaker domestic and global economic activity, possible  disinflationary effects of higher monetary policy rates globally, and any decrease  in international commodity prices. 
ECONOMIC GROWTH 
Real gross domestic product (GDP) grew by 5 percent in the twelve months to June  2023, compared to a growth of 6.7 percent in the year to June 2022. The slowdown  is mainly due to lower growth in mining production. 
According to the October 2023 World Economic Outlook, global output growth was  3.5 percent in 2022, and is forecast to moderate to 3 percent and 2.9 percent in 2023  and 2024, respectively. For Botswana, the Ministry of Finance projects GDP growth  to moderate to 3.8 percent in 2023 and recover to 4.4 percent in 2024, down from  an increase of 5.8 percent in 2022. 
The MPC notes the growth-enhancing economic transformation reforms and  supportive macroeconomic policies being implemented in the country. These  include supportive monetary and fiscal policies, improvement in water and  electricity supply, implementation of the Economic Recovery and Transformation  Plan and the two-year Transitional National Development Plan, as well as reforms  to further improve the business environment. 
The MPC projects the economy to operate below full capacity in the short term and,  thus, not generate demand-driven inflationary pressures. Furthermore, inflation is  forecast to remain within the objective range in the medium term, averaging 4.9 percent in 2024 and 4.7 percent in 2025. Businesses also expect inflation to be  within the medium-term objective range; thus, inflation expectations are well  anchored. Therefore, the current state of the economy and the outlook for both  domestic and external economic activity provide scope to ease monetary policy. Accordingly, the MPC decided to decrease MoPR by 25 basis points to 2.4 percent.
Consequently, 
(a) the 7-day Bank of Botswana Certificates auctions, repos and reverse repos will be conducted at the MoPR of 2.4 percent; 
(b) the Standing Deposit Facility (SDF) Rate is reduced from 1.65 to 1.4 percent, 100 basis points below the MoPR; and 
(c) the Standing Credit Facility (SCF) Rate reduces from 3.65 to 3.4 percent, 100  basis points above the MoPR. 
MEETINGS OF THE MPC 
The MPC meetings for 2024 are scheduled as follows: 
February 22, 2024 
April 26, 2024 
June 13, 2024 
August 22, 2024 
October 31, 2024 
December 5, 2024 
Notes to Editors 
The MPC, chaired by the Governor, is a statutory committee established by the  Bank of Botswana (Amendment) Act, 2022. The Committee consists of nine  members, four of whom are external members. 
Mr Cornelius K Dekop — Governor (Chairman) 
Dr Kealeboga S Masalila — Deputy Governor 
Dr Tshokologo A Kganetsano — Deputy Governor 
Mr Innocent Molalapata — Director, Research and Financial Stability Department Mr Lesego C Moseki — Director, Financial Markets Department Prof Patricia Makepe — External Member 
Dr Pinkie Kebakile — External Member  
Dr Onkokame Mothobi — External Member 
Dr Taufila Nyamadzabo — External Member

Annex: Inflation Forecast Summary for December 2023 MPC Meeting 
 
Actual 
Forecast
2022 
2023 
2023 
2024 
2025
Q3 
Q4 
Annual  
Average
Q1 
Q2 
Q3 
Q4 
Annual  
Average
Q1 
Q2 
Q3 
Q4 
Annual  
Average
Q1 
Q2 
Q3
Inflation 
14.2 
12.6 
12.2 
9.4 
6.1 
2.0 
3.4 
(4.3)
5.2 
(5.5)
4.4 
(5.4)
4.8 
(5.5)
5.5 
(5.8)
4.7 
(3.9)
4.9 
(5.2)
4.4 
(3.6)
4.5 
(3.9)
4.9 
(4.6)


Note: Figures in parentheses represent the previous MPC forecast (October 2023) 
Factors contributing to the downward revision of the forecast in the short term include the following: 
Domestically 
The decrease in domestic fuel prices effected on November 15, 2023. 
Externally 
Downward revision in forecasts for international oil prices and trading partner countries’ inflation in the short term.

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