All eyes are on the Bank of Namibia this week with the bank’s Monetary Policy Committee (MPC) expected to announce a third interest rate hike in six months.
Market watchers said the anticipated repo rate increase is aimed at protecting the country’s exchange rate peg to the Rand and begin normalising interest rates.
The MPC will announce its latest interest rate decision on Wednesday and is increasingly expected to deliver a 50-basis point (bps) hike.
Bank of Namibia Governor Johannes !Gawaxab has already hinted that another repo rate hike should be expected.
FNB Namibia Group Economist Ruusa Nandago has, however, warned that if the MPC does not follow the South African Reserve Bank’s (SARB) 50 basis point hike to 4.75%, the largest since January 2016, the country’s peg with the Rand will suffer.
Simonis Storm Economist Theo Klein indicated that he expects a 50bps hike as the Forward Rate Agreement (FRA) curve factored this in.
“Also, SARB’s MPC did mention that they might support a 50bps hike in their market commentary last month. We expect Bank of Namibia to follow SARB by also hiking 50bps at their next meeting on 15 June,” he said.
BoN raised its repo rate for the second time this year by 25 basis points in April to 4.25%. Since then, Namibia’s inflation has hit 5.6% as the cost of living continues to rise.
Economists at the Bureau for Economic Research in South Africa forecast that the South African Reserve Bank may feel compelled to hike its repo rate by another 50 basis points (bps) this month, although its forecast remains at 25bps, citing higher domestic inflationary pressure.
