The Monetary Policy Committee (MPC) of the Bank of Botswana (BoB) chose to keep the Monetary Policy Rate (MoPR) steady during its April 26, 2024 meeting, considering various factors such as inflation trends and economic forecasts.

During their discussions, the MPC observed a notable decrease in headline inflation, dropping from 3.9 percent in February to 2.9 percent in March 2024, falling below the lower limit of the targeted range of 3 � 6 percent. This decline was largely attributed to the diminishing impact of last year's rise in domestic fuel prices, influenced by base effects.

Looking ahead, the MPC predicts inflation to decrease further to 2.3 percent in April 2024, staying below the lower bound temporarily before returning to within the target range by the third quarter of 2024. Forecasts indicate an average inflation rate of 3.2 percent in 2024 and 5 percent in 2025, shaped by factors like base effects, subdued domestic demand, and adjusted predictions of global food prices.

While risks to this forecast lean slightly towards potential increases in commodity prices and supply limitations, they are balanced by expectations of weaker economic activity both domestically and internationally.

Assessing economic performance, the MPC highlighted a slowdown in real GDP growth to 2.7 percent in 2023, down from 5.5 percent in 2022, mainly due to subdued mining activity. Despite global output growth forecasts remaining stable at 3.2 percent for both 2024 and 2025, the Ministry of Finance anticipates accelerated growth to 4.2 percent and 5.4 percent in 2024 and 2025, respectively, driven by growth-supporting reforms and favorable macroeconomic policies.

These reforms, coupled with the stimulus budget announced in February 2024, supportive monetary and fiscal measures, infrastructure enhancements, and ongoing economic transformation initiatives, are anticipated to boost growth prospects and alleviate inflationary pressures.

By maintaining the MoPR at 2.4 percent, the MPC acknowledged the economy's operation below full capacity in the short term, thus not generating demand-induced inflationary pressures. Despite inflation temporarily lingering below the lower limit, the MPC expects it to return within the target range and approach the upper limit by 2025.

Business sentiment, as evidenced in the latest Business Expectations Survey, mirrors this outlook, anticipating inflation to remain within the targeted range but closer to the upper limit by 2025.