Consumers can breathe some sigh of relief as the Bank of Namibia (BoN) decided to keep the repo rate unchanged at 6.50 percent.
According to the bank’s Monetary Policy Committee the decision, which was announced on Wednesday, was underpinned by the recent downward trend in the growth of instalment credit extended to households and the need to continue supporting the domestic economy. BoN influences local monetary policy through the repo rate, which is usually kept close to the South African repo rate.
“In our recent credit report we cited the decline in PSCE, less pressure on foreign reserves with the successful rise of the Eurobond in October and continuing low inflation as reasons why we did not expect rates to be hiked today,” noted Purvance Heuer, director of securities at stock brokerage, Simonis Storm Securities, after the announcement on Wednesday.
“The Bank of Namibia decided to leave the benchmark repo rate unchanged at 6.50%, citing the need to maintain a supportive monetary stance and the downward improvement in instalment credit extended to households. The bank influences local monetary policy through the repo rate, which is kept close to the South African repo rate.”
Meanwhile, Capricorn Asset Management’s Suta Kavari, who recently argued that the likelihood of an interest rate hike increased following the South African Reserve Bank’s decision to increase interest rates by 25 basis points at their monetary policy meeting last month, said he based his forecast on the fact that BoN would take a pro-cyclical stance and hike interest rates by 25 basis points, pre-empting the United States Federal Reserve’s December rate hike and the South African Reserve Bank’s follow-up hike in January.
“The risk is now that should there be a strong sell-off in emerging market currencies following a US lift-off, monetary policy response would possible require more aggressive interest rate increases going forward,” said Kavari.
Kavari added that most emerging markets have been grappling with the possible repercussions of higher interest rates in the United States, a situation he said was complicated further by plunging currencies.
“The sheer spectre of higher interest rates in the US and a China slowdown continue to weigh heavily on many emerging markets’ currencies, especially commodity currencies like the South African rand. African currencies have especially felt the full brunt of the market’s risk-aversion, with investor sentiment sliding away from emerging markets. Many central banks the continent over have tightened monetary policy to stem off inflationary threats,” noted Kavari.