Botswana's central bank held its Bank Rate steady at 9.5 percent, saying the medium-term outlook for inflation remains positive, despite unfavourable short-term developments, and the current policy stance is consistent with inflation hitting the bank's 3-6 percent target.
The Bank of Botswana, which has held rates steady since December 2010, said domestic economic output grew by 7.7 percent in the 12 months to September 2012, with non-mining Gross Domestic Product up by 11.6 percent while the mining sector contracted by 12.5 percent.
The central bank expects non-mining GDP to remain below potential in the medium term and thus be non-inflationary, with modest growth in government expenditure and personal incomes. Botswana's GDP rose 1.1 percent in the third quarter from the second for annual growth of 5.7 percent, down from 8.5 percent in the second quarter.
Botswana's inflation rate was steady at 7.4 percent in November and December and is expected to remain above the bank's target range in the near term.
But the "underlying trend remains downwards and, therefore, inflation is expected to converge to the medium-term objective range towards the end of 2013," the bank said after a meeting of its policy committee on Feb. 12, adding:
"Weak domestic demand and the forecast modest external inflationary pressures contribute to the positive inflation outlook in the medium term."