Easing household indebtedness keeps rates on hold
The Bank of Namibia Monetary Policy Committee this week decided to maintain the repo rate at 6.5%, influenced to a large degree by the downward trend in the growth in instalment credit, explained central bank Governor, Ipumbu Shiimi.
Speaking off the cuff, Shiimi said, “credit going to households flattened. We are happy with the trend. It is now a hyena and not a dragon. Growth in credit extended to households moderated from a peak of 23.5% at the end of February to 14.7% at the end of October.” Growth in Private Sector Credit Extended maintained a steady growth during the first ten months of 2015, standing at 15.6% year-to-date.
Added Shiimi, “inflation continues to behave and going forward, inflation will remain in reasonable bounds. Annual inflation continued to decline on average during the first ten months of 2015. The lower inflation was mainly due to declining transport inflation on account of low and favourable international oil prices as well as household and food inflation.”
Although the economy had displayed a satisfactory performance during the first ten months of the year, Shiimi said that a revision of Namibia’s growth rates would be shared in the coming weeks. “Risks to the domestic economy growth include soft commodity prices, the prevailing drought and slow growth in the country’s main trading partners. The economy is still registering positive growth.”
Analysts Suta Kavari of Capricorn Asset Management and Purvance Heuer of Simonis Storm Securities commented on the central bank’s stance. Said Kavari, “We argued that there is the likelihood of an interest rate hike following the South African Reserve Bank’s decision to increase interest rates by 25 basis points at their monetary policy meeting last month. We expected that the Bank would take a pro-cyclical stance and hike interest rates by 25 basis points, pre-empting the Fed’s expected December rate hike and the South African Reserve Bank’s follow-up hike in January.
He added, “In the context of the current uncertainty gripping the market, it was understandable that the Bank of Namibia decided keep the policy unchanged in anticipation of the Federal Reserve’s move.”
On his part, Heuer said, “the Monetary Policy Committee of the Bank of Namibia decided to keep the repo rate unchanged at 6.5%. The decision 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. In our recent Credit Report we cited the decline in Private Sector Credit Extension, less pressure on Foreign Reserves with the successful raise of the Eurobond in October and continuing low inflation as reasons why we did not expect rates to be hiked.”