As Botswana’s inflation surged, diverging views have emerged over whether the Bank of Botswana has the tools to bring it down. One economist told this publication that the current situation has exposed the limits of conventional monetary policy. In its defence, the Bank stated that no central bank instrument can realistically return inflation to within its objective range instantaneously, noting that the full impact of monetary policy actions taken today is typically felt at least a year later. The Bank of Botswana believes its interventions have previously brought down inflation, including by anchoring second-round effects.
Inflation registered 10.3 percent in April, with much of the increase attributed to the transport group alone, as fuel prices rose. Central banks typically use the rate they set — in this case, the Monetary Policy Rate (MoPR) — to curb inflation. However, economist Sennye Obuseng told this publication that this approach works mostly for demand-driven inflation.
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