The Bank of Namibia (BoN) is expected to increase the repo rate by 25 basis points to 7% on Wednesday, 28 October, as rising inflation and higher interest rates in South Africa increase pressure on the central bank to tighten monetary policy.
Economists from Simonis Storm, Standard Bank Namibia and High Economic Intelligence (HEI) have all forecast an increase from the current 6.75%, which would push commercial banks’ prime lending rate from 10.5% to 10.75%.
The anticipated increase would be the second this year, following a 25-basis-point adjustment in June, and would result in higher borrowing costs for households and businesses.
Simonis Storm Economist Almandro Jansen said there was a 70% probability of a 25-basis-point increase, compared with a 25% chance of the rate remaining unchanged and a 5% probability of a larger 50-basis-point hike.
“We expect the Bank of Namibia’s Monetary Policy Committee to raise the repo rate by 25 basis points to 7.00% on Wednesday, 28 October. Commercial banks would then raise prime from 10.50% to 10.75%. This would be the second hike of the cycle, after June’s increase to 6.75%,” Jansen said.
Standard Bank Namibia economist Helena Mboti also expects the repo rate to increase to 7%, citing rising international oil prices, persistent inflation and tighter global monetary conditions.
She said recent interest rate increases by the US Federal Reserve and South African Reserve Bank had strengthened the case for the Bank of Namibia to maintain a tighter monetary policy stance.
“Monetary policy will be tighter following global inflation risks and the central bank is expected to keep rates higher for longer delaying the previously anticipated easing cycle,” Mboti said.
HEI economist Lewis Komu and research analyst Rauna Siyengo also expect a 25-basis-point increase, noting that Namibia currently has the lowest repo rate in the Common Monetary Area following increases in South Africa, Lesotho and Eswatini.
“Against this backdrop, a 25-basis-point hike to 7.00% appears warranted to reinforce price stability amid rising inflationary pressures and maintain alignment with monetary conditions across the Common Monetary Area (CMA). However, a hold at 6.75% remains a credible alternative,” they said.
The forecasts come as Namibia’s annual inflation rate increased to 5.4% in September, compared with 5% in August and 3.2% during the same month last year.
Jansen expects inflation to rise further, reaching approximately 6.2% around the turn of the year, driven partly by higher fuel and transport costs.
He projects average inflation of 4.3% for 2026, above the Bank of Namibia’s latest forecast of 4%.
Mboti said Namibia remained vulnerable to imported inflation because of its dependence on fuel and other imported goods, while Komu and Siyengo warned that rising transport costs could lead to further price increases across the economy.
Another factor supporting expectations of an interest rate increase is the widening gap between Namibia’s and South Africa’s repo rates.
South Africa’s repo rate stands at 7.25%, compared with Namibia’s 6.75%, leaving a 50-basis-point difference.
Jansen warned that the gap could encourage financial institutions and businesses to move funds into higher-yielding rand-denominated investments, potentially placing pressure on Namibia’s international reserves.
However, HEI said the country’s foreign reserves increased to N$58.5 billion in August, providing 3.6 months of import cover and remaining sufficient to support the currency peg.
The economists also acknowledged that weaker economic growth could influence the central bank’s decision.
Namibia’s 2026 economic growth forecast was recently revised down from 3.1% to 2.3%, while the mining sector has recorded six consecutive quarters of contraction.
Looking ahead, Jansen expects the repo rate to remain at 7% in December, with another increase possible in early 2027 if inflation rises above 6% or South Africa tightens monetary policy further.
Mboti expects rates to remain largely unchanged through most of 2027, with possible cuts in the second half of the year if inflation moderates.
HEI said the Bank of Namibia could still keep the repo rate unchanged at 6.75% if inflation expectations remain contained.
The central bank is scheduled to announce its monetary policy decision on Wednesday, with the outcome expected to determine whether households and businesses face another increase in borrowing costs.
