Guest Contributor | Aug 22, 2017 | 0
No room for interest rates change
The Bank of Namibia has ruled out a change in interest rates as long as inflation remains low and South African monetary authorities maintain the current interest rate regime.
Speaking to the Economist, Central Bank Governor Ipumbu Shiimi said any adjustment in interest rates will depend on the three variables of inflation, economic growth and Namibia’s biggest trading partner.
Shiimi said before a decision is taken to increase interest rates, the monetary policy committee will have to see “Inflation running away very significantly above double digit levels for a consistent period.” Adding that the bank will also have to consider what impact inflation above 9% will have on economic growth.
The central bank chief further said the bank will have to keep one eye on the activities of “our biggest trading partner, South Africa because interest rates have to be more or less the same.” He argued that any significant interest rate divergence with South Africa might result in capital flight to that country as Namibia becomes less attractive.
In line with the South African Reserve Bank’s decision to leave the repo rate unchanged at 5% earlier this month, the Bank of Namibia this week also kept the local repo rate unchanged at 5.50%.
Governor Shiimi said although the global economic conditions remains weak and there are no clear signs that a significant recovery will take place soon, Namibian economic growth is relatively resilient, while inflation remains at tolerable levels.
He said the repo rate needs to remain low to support the economy and mitigate, as far as possible, the impact of endured slow growth in many of the country’s trading partners.