The Bank of Botswana maintained its policy rate at 5% and said inflation is expected to stay within the 3% to 6% objective range in the medium term. Inflation dipped to 2.9% in November from 3% in October.
The central bank has a positive outlook on price stability, supported by lowered pressures on domestic demand and a moderate rise in foreign prices. But the outlook could be dampened by slower global economic activity and a possible slide in commodity prices.
Domestic nonmining output is expected to track below trend in the short to medium term as household incomes and major trading partners register modest growth. A "gradual" economic recovery will likely occur in the medium term as performance picks up in advanced and emerging market economies, the bank said.
Within the region, South Africa's weak growth in 2017 could also hurt Botswana's domestic expansion. Botswana's GDP expanded 3.1% in the twelve months to June, up from a 0.7% contraction in the year-ago period.