Botswana's central bank cut its Bank Rate by 50 basis points to 8.50 percent, saying the economy is growing below potential and unemployment is high and this "provides an opportunity for non-inflationary stimulus to the economy."
The Bank of Botswana, which also cut its rate by 50 basis points in April, said the inflation outlook suggests that a "more accommodative monetary policy stance is consistent with the achievement of the bank's 3-6 percent inflation objective in the medium term."
Inflation eased to 6.1 percent in May from 7.2 percent in April with weak domestic demand contributing to the positive inflation outlook. In the short term, inflation is expected to be close to the upper end of the bank's target range, but it should converge to the range in the second half of 2013.
"The lower global growth, subdued demand and stable commodity prices have contributed to moderate inflationary pressures," the bank said, adding persistent capacity underutilisation and high unemployment rates in major economies is restraining global inflation.
Domestic output rose 3.7 percent in the year to December 2012 and expansion is expected to remain below potential in the medium term and thus not inflationary, the central bank said.