Another rate cut on cards

NAMIBIANS can expect another interest rate cut – at least 50 basis points – in less than three weeks, local economists yesterday speculated after the bank rate in South Africa dropped by 100 basis points.

Saying ‘there are as yet few convincing indications that the (economic) recovery will be quick’, South African Reserve Bank (SARB) Governor Tito Mboweni decreased the repo rate, or the rate at which commercial banks borrow money from the central bank, to 7,5 per cent.It was his fourth cut this year, and one local economists are sure will result in a similar move by the Bank of Namibia (BoN) on June 17.The BoN on Wednesday confirmed that its next monetary policy review will be then, even though the bank lowered its repo barely a week ago.Simonis Storm Securities (SSS) Research Director Emile van Zyl expects BoN Governor Tom Alweendo to cut the repo by 50 basis points to seven per cent.’It appears as if the BoN has convinced commercial banks to drop their prime lending rates by more than the bank rate. I think the BoN will now regularly decrease the bank rate by 50 basis points, with prime rates maybe dropping by even more,’ Van Zyl told The Namibian.Old Mutual Namibia Group Economist Robin Sherbourne agreed.’We expect both the BoN and the SARB to continue cutting their repos, but in 50 basis point steps, up to August and thereafter holding them constant for the rest of the year,’ Sherbourne said shortly after Mboweni’s announcement.’The key issue in both countries now appears to be turning to the spread between central bank determined repo rates and commercial bank determined prime rates,’ he said.Two of the four local commercial banks, Standard Bank Namibia and FNB Namibia, lowered their prime and home loan rates by more than the BoN’s extraordinary repo cut of 50 basis points last Wednesday. Standard Bank Namibia decreased its rates by 100 basis points and FNB Namibia by 75 basis points after mounting pressure from Alweendo to narrow the huge difference between the repo and prime rates.Bank Windhoek yesterday afternoon announced that it was dropping its prime rate by 75 basis points and their home loan rate by 50 basis points. The lower rates became effective today.Investment House Namibia (IHN) is more optimistic about the upcoming rate review and has allowed for a cut of 100 basis points in the forecast in their Daily Market Analysis.If the repo is indeed lowered at the next review meeting, it will be the fifth cut since last December. Governor Alweendo has in total slashed the bank rate by three percentage points since December.jo-mare@namibian.com.na