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May records lowest inflation figure so far this year, central bank should consider cutting interest rates – researchers

May records lowest inflation figure so far this year, central bank should consider cutting interest rates – researchers

The month of May recorded the lowest inflation figure for 2019 at 4.1% according to the Namibia Consumer Price Index released by the Namibia Statistics Agency this week.

After January 2019 showed a 4.7% inflation decrease form the 5.1% recorded in December 2018, inflation has averaged around 4.4% in February, 4.5% in March and April and a slight decrease to 4.1% in May.

According to the statistics agency, inflation remains relatively low especially in the food category despite the drought situation, while transport inflation is expected to continue to trend up in June due to the increase in fuel prices.

Indileni Nanghonga, Junior Analyst at Simonis Storm Securities said considering the current level of inflation, stable liquidity position, fund inflows through Regulation 28, contracting economic growth and a strong 5.6 months of import cover, the Bank of Namibia should consider cutting interest rates to support economic activities.

After a slowdown was reflected in sectors such as mining, agriculture, construction and wholesale and retail trade, the Bank of Namibia maintained the interest rate at 6.75% on 12 June.

Eloise du Plessis, Head of Research at PSG Konsult forecast that there will be a 25 bps interest rate cut later this year, following an expected similar interest rate cut by the South African Reserve Bank.

“We believe such a decision is justified due to continued weak local economic growth as well as an expected loosening of global monetary policy, and is also supported by relatively moderate and stable domestic inflation,” Du Plessis said.


 

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