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Namibia Breaks From Sa With Smaller Hikes – Its Interest Rate Now 50bps Lower

The Bank of Namibia deviated from South African monetary policy for the first time this year, raising borrowing costs by a quarter percentage point over concerns that a bigger increase would constrict demand and crimp economic growth.

The monetary policy committee lifted the repurchase rate to 7.25% from 7%. The hike was less than the South African Reserve Bank’s 50 basis-point increase last month. 

Namibia’s monetary policy often tracks that of neighbouring South Africa because its currency is pegged to the rand, but they have diverged when their inflation trajectories differ. That happened in November, when Namibia increased borrowing costs by half a percentage point and South Africa by 75 basis points. Wednesday’s divergence means Namibia’s interest rate is now 50 basis points lower than South Africa’s.  

The move was aimed at anchoring inflation expectations and safeguarding the nation’s peg with the rand, while avoiding harsh impulses to the domestic economy, Governor Johannes !Gawaxab told reporters in the capital, Windhoek.

The central bank expects economic growth to slow to 3% from 4.6% the previous year, he said. It previously forecast growth of 2.7% for this year.

Annual inflation quickened to a seven-month high of 7.2% in March and is forecast to average 6.1% in 2023, !Gawaxab said. That compares with a previous estimate of 5.3%. 

International reserves rose to 48.5 billion Namibian dollars (R46 billion) end March, compared with 47.4 billion Namibian dollars in February. That’s enough to cover 5.1 months of imports and support the peg between the nation’s currency and the rand, !Gawaxab said.

Source : News24