The Bank of Botswana's Monetary Policy Committee (MPC) has reduced the Monetary Policy Rate (MoPR) to 2.15% from 2.4%.
Headline inflation was 3.1% in April 2024 and is projected to remain within the 3% – 6% objective range into the medium term. Inflation is forecast to remain low but within the objective range in the medium term, averaging 3.6% in 2024 and 4.5% in 2025.
The monetary policy rate is a short-term, often overnight, rate that banks charge one another to borrow funds. When inflation (the rate at which prices for goods and services rise) is above the central bank's targets, the bank raises the policy rate to slow down the economy. This happens because raising the policy rate will increase the cost of borrowing as loans would now come with higher interest rates. According to the economic theory of supply and demand, if borrowing money becomes more expensive, consumer demand will fall, bringing down prices with it along the way.
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 independent external members.
The next MPC meeting will be held on 22 August 2024.