Kgori expects rate hikes

Analysts at Kgori Capital expect the Bank of Botswana (BoB) to raise interest rates by another 75 basis points this year. In a commentary released last week, the analysts said they expect inflation to remain elevated but “gradually reduce and sustainably trend within the BoB’s objective range from the second quarter of 2024”. The central bank has raised rates three times this year, by a total of 151 basis points, citing the need to ensure that expectations of higher inflation do not become entrenched in the local economy. The BoB expects inflation to return to the three to six percent objective range by the third quarter of 2024. Inflation hit 14.6% in August, the highest level since November 2008, driven largely by fuel and food prices. Kgori’s analysts said with the exception of housing inflation, the relief measures announced by government in August did not appear to be reigning in price pressures in the economy. The measures included a temporary reduction of Value Added Tax, as well as zero rating of certain commodities. Central bank experts had expected the relief measures to reduce inflation by 1.23 percentage points while acknowledging that this projection was not definite. Finance Minister Peggy Serame on Tuesday told a budget consultative meeting that the recent moderation in global oil prices was expected to provide relief to domestic inflation. On Wednesday, statisticians in South Africa released data indicating that annual inflation slowed in August, for the first time since January, on decelerating fuel prices.