African markets

Central Bank of Namibia raises repo rate to 5.50%

The central bank’s Monetary Policy Committee (MPC) decided to raise the repo rate by 75 basis points, from 4.75 to 5.50%.

“The decision has been taken in consideration of continuing inflationary pressures and is deemed appropriate to preserve the one-to-one link between the Namibian dollar and the South African rand while respecting the country’s international financial obligations,” the vice-president said. Governor of the Bank of Namibia, Ebson. Uanguta said Wednesday during an announcement.

According to Uanguta, domestic economic activity increased in the first six months of 2022, but inflationary pressure remained high, while growth in the extension of credit to the private sector picked up slightly.

“Namibia’s headline inflation is now expected to average around 5.8% for 2022, with higher rates in the second half than the first,” he added.

According to economist Theo Klein in an analysis, the repo rate remains low relative to inflation in Namibia and South Africa, suggesting that monetary policy is accommodative at the moment.

“The repo rate has never been so low relative to inflation in the past 10 years, both in Namibia and South Africa. However, the gap is narrowing as the pace of increases picks up,” he said, adding that this indicates the policy could be considered restrictive in the near future.

“Already, market participants are expecting rate cuts in the US and UK by the second half of 2023 (2H2023), implying that South Africa and Namibia may be considering cut rates towards the end of next year,” he concluded.

Namibia Economist