Botswana Cuts Benchmark Interest Rate to 6.5% to Support Growth

The Bank of Botswana reduced its benchmark interest rate for the first time in more than a year to help support the economy as inflation pressures ease.

The rate was cut by 1 percentage point to 6.5 percent, the first adjustment since Oct. 2013, the central bank said in an e-mailed statement on Wednesday.

“The current state of the economy and both the domestic and external economic outlook, as well as the inflation forecast, provide scope for easing monetary policy to support economic activity without undermining price stability,” the central bank said.

Gross domestic product probably expanded 4.8 percent in the year through September, the bank said. Finance Minister Kenneth Matambo forecast on Feb. 2 the economy will probably grow 4.9 percent this year, down from 5.2 percent in 2014.

Botswana is the world’s biggest diamond producer and has the highest credit rating in Africa. The central bank is one at least three on the continent that eased monetary policy since June.

Inflation in the southern African nation slowed to 3.6 percent in January from 3.8 percent in the previous month. The medium-term outlook for price growth is positive due to weak global activity and a possible further decline in commodity prices, the central bank said.

“Monetary policy is also aligned with the need to safeguard financial stability,” it said. “Credit growth is assessed to be at a sustainable level, thus posing no threat to financial stability.”

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