Guest Contributor | Jul 23, 2020 | 0
Concerns rife over inflation
Inflation has plateaued at 7% in recent months, ticking slightly higher last month with price pressures expected to remain raised towards the end of the year, said the Namibian Statistic Agency (NSA) last week.
According to the agency, Real Gross Domestic Products (GDP) contracted in the second quarter as growth concerns increasingly weigh on the minds of monetary regulators. However, the currency remains a significant upside risk to the inflation outlook.
NSA said the annual inflation rate was estimated at 6.9% year on year in September, slightly higher than the 6.8% yearly increase recorded in August. Looking at the four largest sub-indices comprising the overall Consumer Price Index.
Last week, the rand to which the Namibian dollar is pegged one for one depreciated sharply, once more, due to an up tick in political risk, and the currency will remain vulnerable as long as the South African finance minister faces the axe and junk status looms.
According to NSA, Food & non alcoholic beverages sub-index increased by 12.0% year on year in September, compared to the 11.5% year after year increase in August with the previous month saw relatively large increases in fish and fruit prices.
The alcoholic beverages & tobacco sub-index rose by 5.2% year on year last month, lower than the 5.5% year on year increase recorded in the preceding month, driven by increasing alcoholic beverage prices.
Housing, utilities, gas & other fuels sub-index increased by 8.0% year after year in September, remaining unchanged unchanged since August as increases in water supply, sewerage and refuse collection prices were offset by lower electricity, gas and other fuel prices, according to the statistics agency. The transport sub-index declined slightly to 3.3% yearly last month, compared to 3.4% the previous month as vehicle prices rose slightly in September on a monthly basis as inflation remained unchanged at 0.2% in September.
PSG Financial Services Namibia said the outlook for monetary policy has become very uncertain in recent months, with a number of developments holding the potential to influence the central bank’s decisions.
“We expect the BoN to hold steady next week, but the December decision will ultimately depend on how certain developments unfold in the coming months,” their announcement read.
Meanwhile, although the South African Reserve Bank (SARB) sounded decidedly more dovish at its September meeting, upside inflation risks have increased – another factor that could place the rand under pressure towards year-end relates to the possibility of the US Federal Reserve raising interest rates in December. Should the SARB tighten policy in November, this would raise the possibility of the BoN following suit the month thereafter.