BoN keeps repo rate unchanged at 7,50%

BANK of Namibia (BoN) retained its key repo rate steady at 7,50 per cent as expected, following a meeting held by the central bank’s Monetary Policy Management Committee on Thursday in line with a similar decision by the South African Reserve Bank.

In a press release BoN governor Tom Alweendo said annual inflation continued to rise in July and August with the inflation rate at 4,22 per cent in August from 3,61 per cent in July. “Taking in cognisance of all factors and in view of the fact that inflation – though rising – still seems to be contained, the Bank of Namibia has decided to leave its bank rate unchanged at 7,50 per cent.” The bank expects the business community to take advantage of low level of interest rates to expand their economic activities.The current monetary policy stance therefore remains supportive for further capital formation and robust economic activity,” said Alweendo.Despite economic activities having slowed down between May and August this year, the governor added that preliminary indicators for the third quarter showed some positive developments in real sector activities.Slow down in the second quarter was attributed to reduced output in sectors such as agriculture, fishing, manufacturing, water and electricity.The annual growth in the broad money supply increased to 14,6 per cent in August from 8,4 per cent recorded in July.The growth was attributed largely to net foreign assets and private sector credit.Credit to the private sector went up to 21,8 per cent in August from 19.3 per cent year-on-year registered in the previous month.Said Alweendo, “The improvement in credit to the private sector can be explained primarily by increases in credit to both the business sector and individuals.”However, the stronger growth in the private sector credit has not had any noticeable impact in inflationary pressures, this said Alweendo, is due to the fact that the greater amount of credit goes to the productivi activities rather than consumption.Alweendo highlighted that the continued rise of crude oil prices –at US$54,83 (N$361,88) on Friday– remained the single risk to potentially dent the global economic outlook for 2004, and an upside risk to inflation.”Taking in cognisance of all factors and in view of the fact that inflation – though rising – still seems to be contained, the Bank of Namibia has decided to leave its bank rate unchanged at 7,50 per cent.” The bank expects the business community to take advantage of low level of interest rates to expand their economic activities.The current monetary policy stance therefore remains supportive for further capital formation and robust economic activity,” said Alweendo.Despite economic activities having slowed down between May and August this year, the governor added that preliminary indicators for the third quarter showed some positive developments in real sector activities.Slow down in the second quarter was attributed to reduced output in sectors such as agriculture, fishing, manufacturing, water and electricity.The annual growth in the broad money supply increased to 14,6 per cent in August from 8,4 per cent recorded in July.The growth was attributed largely to net foreign assets and private sector credit.Credit to the private sector went up to 21,8 per cent in August from 19.3 per cent year-on-year registered in the previous month.Said Alweendo, “The improvement in credit to the private sector can be explained primarily by increases in credit to both the business sector and individuals.”However, the stronger growth in the private sector credit has not had any noticeable impact in inflationary pressures, this said Alweendo, is due to the fact that the greater amount of credit goes to the productivi activities rather than consumption.Alweendo highlighted that the continued rise of crude oil prices –at US$54,83 (N$361,88) on Friday– remained the single risk to potentially dent the global economic outlook for 2004, and an upside risk to inflation.