The Bank of Namibia (BoN) is expected to keep its repo rate steady at 7.75% after the Monetary Policy Committee (MPC) meeting scheduled for Wednesday, analysts have predicted.
The forecast aligns with regional trends, particularly with the South African Reserve Bank’s recent stance.
“We believe that the central bank will likely keep the repo rate unchanged. Our projections indicate that inflation will hover around 4.9% by the end of 2024, indicating stability that makes immediate rate cuts unnecessary at this time,” said Simonis Storm Head of Investments, Max Rix.
He highlighted the importance of maintaining the repo rate to “preserve the interest rate differential with South Africa,” which “supports overall economic stability.”
He pointed out that private sector credit extension remains subdued, suggesting that maintaining the current repo rate could support economic growth.
Looking ahead, Rix noted, “We expect the first rate cut to occur towards the end of 2024,” aligning with projections of manageable inflation and stable economic conditions.
Economist at First Rand Namibia, Helena Mboti, echoed similar sentiments, reflecting on South Africa’s recent decision to keep its repo rate steady at 8.25%.
Mboti also concured that Namibia will uphold a 50 basis points differential until South Africa begins cutting rates later in 2024.
“This implies that the SARB’s expected 25bps cut before year-end ushers in Namibia’s cutting cycle in December 2024 with its 25bps reduction. Over the last ten meetings, BoN has maintained this 50bps difference without significant capital flight, and international reserves remained above the three-month SACU import cover benchmark,” she said.
Mboti highlighted the BoN’s robust reserve position and its ability to sustain the differential without significant capital flight.
IJG Research Analyst, Angelique Bock, said Namibia’s monetary policy framework is underpinned by the currency peg to the South African rand.
As a result, given that Namibia’s repo rate is already 50bps lower than South Africa’s, the firm expects the MPC to leave rates unchanged.
“If BoN were to cut the repo rate, it would widen the spread and potentially lead to capital outflows, as investors might seek better returns in South Africa. Such outflows could jeopardize the currency peg,” she said.
