This decision was taken after a meeting that reviewed recent domestic and international economic developments, said BoN governor, Tom Alweendo.

The decision was also taken in line with the South African Reserve Bank monetary policy committee's decision that reduced the repo rate by 50 basis points to 7,50 per cent.

"Taking all factors into account, and in view of the generally favourable inflation outlook, the Bank of Namibia has decided to reduce the bank rate ...

this decision is in line with the SARB monetary policy committee's decision."

"This move will lead to harmonisation of the two countries benchmark rates.

The bank expects that the current monetary stance will create a favourable business environment and boost economic activities," Alweendo pointed out in a monetary policy statement released on Thursday.

Alweendo, however, noted that the continued rise in the world oil price still remained the biggest single risk that had the potential of denting the global economic outlook.

Oil prices have risen by more than one-third since the end of 2003.

This trend could be attributed to accelerating global demand that has left supplies tightly stretched as well as production disruptions in Iraq and Russia.

It is feared this will filter into the production process and thus cause inflation.

In an inflation update, BoN said annual inflation that had been on the rise since January had declined in June.

The governor said despite increasing slightly on a quarterly basis, the inflation rate did not seem to be a serious threat to the economy.

Other factors that, however, could cause high inflation, such as the exchange rate and money supply, remained relatively stable.

As in the first quarter of 2004, oil prices remained the single factor that was cited as causing concerns over an increase in domestic inflation within the immediate future.

Inflation decreased slightly to 2,33 per cent in June from 2,39 per cent in January and a peak for the year of 4,09 per cent registered in April 2004.

The annual food inflation declined to 1.48 percent in June from 2.65 percent in May.

Services also declined slightly to 4.41 percent from 4.45 percent in May, while non-food inflation declined to 1.48 percent from 2.75 in May 2004.

According to BoN, this decline in overall annual inflation was caused by the decline in the costs of recreation and education, food, housing, fuel and power, medical care and health services.

On the exchange rate, Alweendo noted that the Namibia dollar continued to gain ground against major international currencies, albeit at a slower pace than last year.

In May, the local currency appreciated to N$6,70 to the US Dollar and further to N$6,40 in June from N$6,90 in January.

Alweendo said, "The exchange rate developments seem to suggest a favourable inflationary outlook in the immediate future."

The annual growth in the broad money supply declined to 12,40 per cent in June from 16 per cent recorded in May.

On a quarterly basis, BoN said the broad money supply, M2, declined by -2,30 per cent this quarter compared to a growth of 8,30 per cent in the first quarter.

Annual private sector credit grew slightly by 18 per cent in June from 16,60 per cent year on year registered in May.

This growth in private sector credit, according to the central bank, could be attributed to credit to business that grew by 32,61 per cent.

Credit to individuals on the other hand grew by only 9,81 per cent annually.

Meanwhile, commercial banks have also reduced lending rates as a ripple effect from the central bank's decision.

Bank Windhoek has announced a reduction of 0,25 per cent in its prime lending and mortgage bond rates - with effect from August 14 - thus bringing both the prime lending rate and the mortgage bond rate of the bank to 12,25 per cent.

First National Bank of Namibia said with effect from September 1, both the bank's prime rate and home loan rate will decrease by 25 basis points from 12,50 per cent to 12,25 per cent.

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