In the past five years, excess liquidity in the banking system, as represented by outstanding Bank of Botswana Certificates (BoBCs), has declined from P17.7 billion as at end-2010 to P4.6 billion in February 2015. The main cause was the Bank of Botswana’s phased reduction of the excess money that is continuously mopped by way of auctioning of BoBCs.
At the same time, supportive financing conditions, favourable labour market dynamics and rising wage growth continue to underpin the euro area expansion and gradually rising inflation pressures. This supports our confidence in the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.