The Bank of Namibia (BoN) is widely expected to raise its repo rate by 25 basis points to 6.75% at its Monetary Policy Committee (MPC) meeting on 17 June, as rising inflation, higher fuel costs and South Africa’s recent interest rate increase put pressure on policymakers.
High Economic Intelligence economist Lewi Komu said the balance of risks has shifted since the central bank’s last policy meeting in April, making a rate hike the most likely outcome, although a hold remains possible.
“The most likely outcome at the 17 June MPC meeting is a 25-basis-point hike, although a hold remains a credible alternative if the Bank of Namibia judges that inflation pressures have not yet become sufficiently broad-based,” Komu said.
He noted that Namibia’s inflation outlook has deteriorated, driven primarily by fuel and transport costs, while South Africa’s rate increase and the widening interest rate differential within the Common Monetary Area have strengthened the case for tighter monetary policy.
Headline inflation accelerated from 2.1% in March to 3.1% in April and 4.1% in May, reflecting the impact of sharp fuel price increases and rising transport costs.
Petrol prices increased by a cumulative N$3.90 per litre during April and May, while diesel prices rose by N$8.63 per litre. The latter is expected to filter through to freight, logistics and food distribution costs.
Despite the acceleration in inflation, Komu said domestic demand remains relatively subdued, with private sector credit growth improving only gradually and international reserves strengthening to N$58.8 billion in April.
Simonis Storm economist Almandro Jansen also expects the central bank to tighten monetary policy, arguing that inflationary pressures have become more entrenched.
“The Bank of Namibia has held the repo rate at 6.50%, and with the war-related oil shock feeding inflationary pressures through to transport and food costs, our base case leads us to foresee a 25-basis-point rate hike at the next BoN MPC meeting,” Jansen said.
He added that the recent acceleration in inflation suggests the economy has entered a “second phase” of the fuel shock, where higher energy prices spill over into transport fares, food logistics and broader consumer prices.
“The May print of 4.1% confirms that Namibia’s inflation trajectory has shifted decisively higher. In just three months, headline inflation has doubled from 2.1% to 4.1%, and the pace of acceleration is unlikely to slow materially in the near term,” Jansen said.
Jansen argued that the central bank also faces pressure to narrow the interest rate gap with the South African Reserve Bank, which recently raised its policy rate by 25 basis points.
“We expect the BoN to hike by at least 25 basis points to 6.75%, with a 50-basis-point move to 7.0% also plausible given the deteriorating inflation outlook,” he said.
Beyond domestic factors, economists warned that global risks continue to cloud the inflation outlook.
Elevated oil prices linked to geopolitical tensions, the possible expiry of Namibia’s temporary fuel levy relief measures at the end of June, and the prospect of an El Niño-induced drought could all place further upward pressure on prices.
Jansen maintained an average inflation forecast of between 4.5% and 5.0% for 2026, with headline inflation potentially climbing to between 5.0% and 5.5% by mid-year before easing if oil prices stabilise.
