Money – Finance & Strategy · Editorial
By Moakanyi Magazine · June 2026
Holding a rate is also a forecast. In April 2023, with inflation hovering near 10%, the Bank of Botswana kept its key rate at 2.65%, a decision that only makes sense as a bet that price pressures would fade on their own. A central bank that genuinely feared inflation entrenching at that level would have moved; choosing not to was a statement about where prices were heading, not where they stood.
The hold, reported by Reuters, rested on the expectation that inflation would ease back into the bank's 3 to 6% target range. The bank chose to wait on its own projection rather than chase the headline number with a higher rate. That choice carried a clear premise: that much of the price pressure was driven by factors a domestic rate rise could not fix and would soon subside without one.
The Bet: Reading Through the Spike
A central bank that raises every time inflation is high can choke growth fighting pressures that were already on their way out. Much of the inflation of that period was imported, fuel and food prices set well beyond Gaborone's reach, and a higher domestic rate does little to move those. Holding at 2.65% with inflation near 10% says the bank read the spike as largely transitory and trusted the trajectory back toward target more than the current reading.
That is a judgement call with a cost if it is wrong. Hold too long against pressure that proves sticky, and the bank loses ground and credibility, with inflation expectations hardening and a steeper rate path required later to undo the delay. The discipline is in distinguishing a passing surge, driven by external shocks, from an entrenched one, where price rises start feeding wages and expectations at home. The bank wagered on the former, and on its own ability to tell the two apart.
Holding through a spike is a wager that the trend matters more than the moment.
The Anchor: The 3 to 6% Band as True North
The decision is anchored to a stated band rather than the day's figure. By keeping the 3 to 6% target as the reference point, the bank communicated that policy answers to where inflation is heading, not only where it stands, and asked the market to price in the same expectation. A credible target band does quiet work: it shapes what businesses and households expect, and expectations that stay anchored make the actual return to target easier to achieve.
For operators planning borrowing, pricing and wage decisions, that anchor is information. A steady rate paired with a credible return to target reduces the noise around financing decisions and lets firms plan against the band rather than the headline. The value of the hold was partly in the rate itself and partly in the message that the bank was not about to be panicked off its target by a number it judged temporary.
A credible target band lets a steady hand look like a strategy rather than a gamble.
The Condition: Growth and Credibility in the Balance
The hold also reflects a balance every small open economy must strike. Raise hard against imported inflation and you risk slowing domestic activity to fight a fire lit abroad; hold steady and you protect growth but stake your credibility on the forecast. The Bank of Botswana chose to protect activity and lean on its projection, a defensible stance precisely because the pressure was largely external and a rate rise offered limited traction against it.
The whole position, though, rested on one condition: that inflation actually did ease back into the band. A steady hand is wisdom when the forecast holds and a mistake when it does not, and the same decision can read either way depending only on what prices did next. That is the quiet contingency behind every choice to wait rather than move, and the reason a hold is never as passive as it looks.
The patience is only vindicated if the prices behave as predicted.
The April 2023 hold was a measured choice to trust a forecast over a headline, and to protect growth while external pressures ran their course. Its wisdom rested entirely on whether inflation did, in fact, ease back into the 3 to 6% band. For operators, the lasting point is less about the single decision than the posture behind it: a central bank willing to look through noise toward its target, provided the target keeps proving reachable.
Sources: Reuters
