The Bank of Namibia (BoN) is expected to keep the repo rate unchanged at 7.75% during its Monetary Policy announcement meeting scheduled for Wednesday, analysts predict.
The decision would mark the third consecutive time the Monetary Policy Committee (MPC) has maintained the repo rate at 7.75%, following similar outcomes in April and June.
“We do not expect the Bank of Namibia to change the repo rate at this MPC meeting. The repo rate differential between Namibia and South Africa remains unchanged at negative 0.5% after the SARB kept the SA repo rate on hold at their last MPC meeting,” said Eric van Zyl, Head of Research at IJG Securities.
Van Zyl further explained that the Namibian rate is already more favorable to borrowers compared to South Africa’s.
Given South Africa’s sluggish growth, the South African Reserve Bank is anticipated to adopt a more accommodative monetary policy stance to stimulate the economy.
“We believe that the BoN is tilted towards more conservative relative policy decisions and will thus keep rates unchanged as well,” he added.
FirstRand Namibia Economist Helena Mboti also indicated that she expects the Bank of Namibia to leave the repo rate unchanged.
“We maintain our view that the repo rate has peaked at 7.75%, with the first cut of 25 basis points expected in December 2024,” she said.
“This outlook is supported by the SARB’s decision to keep interest rates unchanged on 18 July and by the healthy level of international reserves (N$57.6 million or 3.8 months import cover), which supports the 50 basis points differential with the Rand,” Mboti said.
However, she noted that the repo rate outlook could be influenced by emerging challenges such as adverse weather conditions and supply chain disruptions affecting food and oil prices, which may increase inflationary pressures and delay the start of the cutting cycle.
Max Rix, Head of Investments at Simonis Storm, shared similar views, noting that their projection is based on recent inflation data, which has stabilized at 4.6%.
“While inflation remains somewhat elevated, the lack of significant upward pressure in recent months indicates that the situation is gradually under control. The MPC is expected to maintain the current repo rate to ensure that this positive trend continues, allowing for inflation to be managed effectively while providing a stable economic environment,” he said.
Rix also highlighted that the decision to keep the repo rate steady is influenced by the need to preserve the fixed exchange rate peg between the Namibian Dollar and the South African Rand.
He acknowledged the presence of external risks, such as volatile energy prices, geopolitical tensions in the Middle East, and global food prices affected by the Russia-Ukraine conflict, but noted that these factors do not dominate the current monetary policy outlook.
“Namibia’s economy is on a constructive path, with inflationary pressures being managed effectively. The MPC’s expected decision to hold the rate reflects a prudent approach aimed at sustaining this momentum,” Rix said.
Looking ahead, Rix anticipates the first rate cut towards the end of 2024, assuming continued progress in managing inflation and maintaining economic resilience.
However, he emphasized that the immediate focus remains on maintaining the current stability to ensure the continued trajectory towards controlled inflation and economic recovery.
