UPDATE 1-Botswana lifts bank rate, inflation to stay high

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JOHANNESBURG, June 19 (Reuters) - Botswana's central bank increased its bank rate by 50 basis points to 15.5 percent on Thursday, warning that inflation would maintain on an upward trajectory in the short-term.

The Bank of Botswana said on Wednesday that the country's consumer inflation jumped to 12.1 percent year-on-year in May from 11.1 percent in April, on strong fuel prices.

"The risks to the inflation outlook continue to be predominantly upward, due to, among others, growing pressure on demand with a likely further increase in fuel prices and associated second-round effects," the bank said in a statement on Thursday.

Botswana's inflation has trended upward since October 2007, accelerating out of a targeted range of 3 to 6 percent mainly due to global increases in the prices of food and oil.

"It is now expected that inflation will maintain an upward trajectory in the short-term, up to the fourth quarter of the year, before declining in early 2009," the central bank said.

"In the circumstances, the Bank is taking a further proactive stance by tightening monetary policy with the objective of containing second-round effects and inflation expectations in order to sustain a low medium-term inflation path."

The bank remained committed to responding appropriately to all economic and financial developments to keep inflation under control without undermining sustainable economic growth, the statement added.

The diamond-rich southern African country's economy expanded by 6.1 percent in 2006/07, with the mining sector growing by 5.2 percent and non-mining by 6.8 percent.

But delegates at a Botswana Economic Forum meeting earlier this month said the economy remained too dependent on mining, and high transport and communication costs were hampering diversification. (Reporting by Stella Mapenzauswa)