Botswana’s Central Bank Cuts Key Interest Rate to Record Low

(Bloomberg) -- Botswana’s central bank cut its benchmark interest rate to a record low after the biggest yet economic contraction in the second quarter.

The monetary policy committee reduced the rate to 3.75% from 4.25%, Governor Moses Pelaelo told reporters Thursday in the capital, Gaborone. That’s the first easing since a half-point reduction in April and the second cut this year.

Key Insights

• Inflation was 1% in August, and has been below the central bank’s target of 3% to 6% for 11 months. It was only expected to return to within range in the third quarter of 2021.
• The International Monetary Fund forecasts an economic contraction of 9.6% in 2020 before rebounding to growth of 8.6% next year.
• “The economy will operate below full capacity in the short- to medium-term and therefore we expect low inflation pressures going forward,” Pelaelo said.

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