Guest Contributor | Jul 29, 2020 | 0
Repo rate maintained
“Key economic indicators in the domestic economy continued to show improvements during the review period despite weak activities in the mining sector. The demand for credit was strong, despite the recent moderation in instalment credit extended to th household sector. The annual inflation rate remains low while risks prevailing to the domestic economic outlook include soft commodity prices and the prevailing drought,” said Uanguta.
The annual inflation rate declined during the first nine months of 2015 and were expected to remain low Uanguta explained. “The average inflation rate during the period was 3.4%, lower than 5.5% during the same period in 2014. Overall domestic inflation moderated to 3.3% in September.” The moderation he explained was due to a decline in the price of crude oil, and the knock-on effects on prices of large expense items such as housing, water and electricity as well as gas and other fuels.
Another positive observation for Uanguta was the moderation of credit extended to households. “Annual growth in credit extended to households slowed. The Monetary Policy Committee welcomes this development and will continue monitoring it closely.”
Commenting on the central bank’s stance was Suta Kavari, Investment Strategist at Capricorn Investment Management. He said, “the decision by the Bank of Namibia to keep interest rates unchanged can be seen in light of the current low inflation rate and the moderation in instalment credit, the latter still remaining a major concern. The decision can also be seen in light of the global monetary environment following the US Federal Reserve’s decision to leave the interest rates in the United States unchanged. It brought brief relief to many emerging market central banks, including the South African Reserve Bank, who have also opted to keep rates steady.”
Added Kavari, “going forward we expect the Bank of Namibia to move in tandem with the SARB. Moves by the SARB will be prompted by the US Federal Reserve’s rate hike and process of gradual rate normalisation. Future rate increases will also be dependent on the growth trajectory of Private Sector Credit Extension (PSCE) and the pressures exerted on the country’s foreign reserves.