Interest Rates Go Up

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By Mbatjiua Ngavirue WINDHOEK The Bank of Namibia (BoN) yesterday announced a half percentage point rise in interest rates raising it from the present 7.5% to 8% with effect from today. This comes less than two months after an earlier half percent rise announced on June 8. Making the announcement BoN Governor Tom Alweendo said a meeting of the Monetary Policy Management Committee on Wednesday came to the conclusion there was a need to adjust the interest rate. The interest rate was the major tool available to the bank for managing inflation, which had seen a steady rise from 3.6% in January, to 4.6% in March and reaching 5.3% in June. “The bank therefore not only has to deal with present inflation, but also manage expectations of future inflation,” he said. The main culprit behind inflationary pressure was the steep rise in the average price of crude oil. In 2003 the average price of crude oil was US$ 25 a barrel, but the price had since climbed to an average of US$ 78 a barrel. “Unfortunately the situation is not being helped by the current political turmoil in the world, particularly in the Middle East,” he said. The Bank of Namibia furthermore expected the increases in the price of crude oil to continue. The bank was further concerned about rises in the extension of credit in the country, which had grown to 19% over the last two years. This was worrisome because before the recent growth, the level of credit extended in the economy averaged 11-12%.