Banks expected to hike interest rates

COMMERCIAL banks are today expected to hike their interest rates by about 0,50 per cent after the Bank of Namibia increased the repo rate yesterday.

Following hot on the heels of a similar move taken by the South African Reserve Bank (SARB) yesterday, BoN announced that it had hiked its repo rate (the rate at which it lends money to commercial banks) by 50 basis points to 7,50 per cent. The repo rate had remained unchanged at seven per cent for more than a year.BoN Governor Tom Alweendo attributed the increase to rising international oil prices and inflation.International oil prices have skyrocketed to around US$72 (N$482,40) per barrel, while inflation rose from 3,6 per cent in January to 4,4 per cent in April, with March recording the highest level at 4,6 per cent.Fuel and commodity price hikes due to the volatile oil prices have been blamed for the surging inflation.The hiking of the bank rate is expected to slowdown inflation as it dampens borrowing due to the resultant higher interest rates.”The Bank will continue to monitor the situation of sustained increases in international oil prices and its impact on the overall inflation and will take the necessary actions to maintain price stability,” said Alweendo.He added that it was necessary to put measures in place now before the inflation rate became worrisome.Taking all economic factors into place, inflation according to the BoN forecast data is expected to stay in the range of 4,4 per cent and 5,7 per cent through to the first quarter of 2008.The stability of the currency exchange rate would also play a part in the impact of the world oil prices.Namibia has experienced relatively low inflation for the last two years and the last bank rate adjustment to seven per cent had been effected in April last year.The repo rate had remained unchanged at seven per cent for more than a year.BoN Governor Tom Alweendo attributed the increase to rising international oil prices and inflation.International oil prices have skyrocketed to around US$72 (N$482,40) per barrel, while inflation rose from 3,6 per cent in January to 4,4 per cent in April, with March recording the highest level at 4,6 per cent.Fuel and commodity price hikes due to the volatile oil prices have been blamed for the surging inflation.The hiking of the bank rate is expected to slowdown inflation as it dampens borrowing due to the resultant higher interest rates.”The Bank will continue to monitor the situation of sustained increases in international oil prices and its impact on the overall inflation and will take the necessary actions to maintain price stability,” said Alweendo.He added that it was necessary to put measures in place now before the inflation rate became worrisome.Taking all economic factors into place, inflation according to the BoN forecast data is expected to stay in the range of 4,4 per cent and 5,7 per cent through to the first quarter of 2008. The stability of the currency exchange rate would also play a part in the impact of the world oil prices.Namibia has experienced relatively low inflation for the last two years and the last bank rate adjustment to seven per cent had been effected in April last year.