Botswana cbank to keep policy accommodative, sees inflation rising into target range

GABORONE (Reuters) - Botswana’s central bank expects inflation to rise above 3% in the second quarter for mainly transitory reasons, and will keep monetary policy accommodative, it said on Thursday.

Annual inflation - running at 2.3% last month - was last within the bank’s 3%-6% target range in September 2019.

It dropped below 1% last year as the COVID-19 pandemic depressed economic activity.

Finance Minister Thapelo Matsheka hiked VAT, increased the fuel levy and introduced a new tax on sugary drinks in a budget speech on Feb. 1, which the central bank expects to drive prices higher.

Despite that prospect, central bank officials said on Thursday that they were not planning to tighten monetary policy, after 100 basis points of rate cuts last year to the current rate of 3.75%.

“Factors that will increase inflation this year are mainly ... transitory and once-off,” Deputy Governor Kealeboga Masalila said.

“Therefore we have decided not to respond to the higher inflation forecast with a tighter monetary policy stance as most of these factors will not have second-round effects on prices

Reporting by Brian Benza; editing by John Stonestreet