Dusking 2023 sees easing on inflation fog of war
Lewanika Timothy | Tuesday December 19, 2023 08:08
The rate of change in prices has been on an upward movement since the advent of COVID-19 when supply chain channels were disrupted and since then countries like Botswana have arms up against the price monster.
The central bank this month pegged headline inflation at 3.1 percent, a slight decrease from the previous month’s 3.2 percent.
The inflation level crawls well within the bank’s medium term range of 3-6 percent, which is a desirable position following a lengthy battle against year-on-year price pains. Delivering the Monetary Policy Committee position on interest rates, BoB Governor, Cornelius Dekop said projections on inflation gave the bank confidence to drop interest rates, the first cut since August 2020.
“The Monetary Policy Committee projects the economy to operate below full capacity in the short term and, thus, not generate demand-driven inflationary pressures,” he said. “The current state of the economy and the outlook for both domestic and external economic activity provide scope to ease monetary policy,” he noted.
The BoB last week revised interest rates downwards by 25 basis points from 2.65 to 2.4 percent, a move that means borrowers on variable rate loans such as personal and credit card loans, will enjoy a decrease in their repayments. Consumers intending to take up new loans will also enjoy the new lower interest rates.
The reduction in interest rates follows an updated BoB inflation forecast which shows lower than previously expected prices in the economy going forward. The central bank now expects inflation to average 4.9 percent this year, from its October forecast of 5.2 percent, providing scope to ease borrowing costs and support economic activity. Inflationary pressures have been a difficult child to bed due to international pressures emanating from global disruptions such as spill over effects of the Russia-Ukraine war.
The war in Ukraine has been notorious for spiking the prices of commodities such as petroleum, which is a weighty commodity in the consumer price index. Inflation, or the general increase in the prices of goods and services, has been on the decline this year, moving from a 14-year high of 14.6% last August, to 9.3 percent at the start of the year and 1.2 percent in August – a 35-month low.