The Bank of Namibia (BoN) is expected to keep its repo rate unchanged at 6.50% when the Monetary Policy Committee (MPC) meets on Wednesday, with economists now projecting the start of an easing cycle in the second quarter of 2026 rather than earlier in the year.
Analysts say the central bank is likely to maintain a cautious policy stance in the near term, weighing domestic economic conditions against developments in South Africa, where interest rate decisions continue to shape Namibia’s monetary policy outlook.
The interest rate differential between Namibia and South Africa currently stands at 25 basis points, following the South African Reserve Bank’s (SARB) rate cut in November 2025 and BoN’s decision to keep rates unchanged in December. Maintaining this differential has remained a key consideration for policymakers given the currency link between the two economies.
Standard Bank Namibia Economist Helena Mboti said the Bank of Namibia is expected to delay rate cuts until South Africa moves further into an easing cycle.
“Our baseline expectation is that the Bank of Namibia will keep rates unchanged until the South African Reserve Bank fully closes the differential through additional cuts. Only then would BoN begin its own easing cycle, most likely delivering two 25-basis-point reductions in tandem with South Africa during 2026,” Mboti said.
SARB held its repo rate at 6.75% in January, but Standard Bank now expects three 25-basis-point cuts in South Africa during 2026, citing contained inflation and the need to support weak economic growth. This represents a shift from earlier expectations of a single reduction.
Mboti said that if global monetary conditions turn more accommodative and SARB signals a clearer easing path, the Bank of Namibia could move ahead of South Africa and begin cutting rates pre-emptively, temporarily widening the differential to 50 basis points.
“In a more aggressive global and regional cutting environment, the Bank of Namibia could frontload easing in 2026 and potentially deliver three 25-basis-point cuts. Policymakers may be comfortable with a temporary widening of the differential, provided reserves remain adequate and domestic conditions justify a more assertive stance,” she said.
She added that weak private sector credit extension, subdued economic growth and improving non-performing loan ratios provide a credible macroeconomic case for gradual easing.
Under Standard Bank’s baseline scenario, the BoN would implement a 25-basis-point cut in the second quarter of 2026, followed by a further reduction in the third quarter, before maintaining rates through 2027.
Simonis Storm Economist Almandro Jansen also said there is scope for easing this year, provided inflation remains contained and financial stability risks remain limited. Headline inflation slowed to 3.2% year on year in December, remaining within the central bank’s target range.
“Looking ahead, we expect scope for a further two 25-basis-point rate cuts in the first half of 2026 and the last quarter of 2026, conditional on inflation remaining contained and financial conditions staying stable. While the pace of easing is likely to remain cautious, monetary conditions remain broadly supportive of credit extension and economic activity,” Jansen said.
The policy rate remains at 6.50%, with lending rates already reflecting earlier monetary easing. Average lending rates have edged lower, offering marginal support to affordability, while deposit rates have adjusted in line with softer interest rate conditions as liquidity normalises following the Eurobond redemption.
