Central bank advised to cut repo rate

The Bank of Namibia (BoN) has been advised to cut the repo rate, and is set to make a decision today.

Economist Omu Kakujaha-Matundu says cutting the repo rate will be a wise decision although the central bank might not want to divert from the decision of the South African Reserve Bank (SARB).

“Although the monetary policy committee (MPC) of BoN might not want to divert much from the South African repo rate, it will be wise for BoN to cut the repo rate by a further 25 basis points,” says Kakujaha-Matundu.

He says a repo rate cut will make sense seeing that inflation is now under control and this will motivate consumer spending, therefore, boosting the economy.

“With the inflation rate largely tamed, such a cut will stimulate the economy by propping consumer and investor spending,” says the economist.

In its last announcement, BoN maintained its repo rate at 6.75%.

The decision, taken by the bank’s MPC, is aimed at safeguarding the peg between the Namibia dollar and the South African rand while supporting the domestic economy amid heightened global policy uncertainty, said BoN governor Johannes !Gawaxab at the time.

He said the decision was reached following a comprehensive review of current and expected domestic, regional and global economic developments. Private sector credit extension remained subdued and unchanged at 3.8% since the previous MPC meeting.

Commercial banks’ prime lending rate is expected to remain at 10.50%.

SARB governor Lesetja Kganyago announced on 31 July that interest rates will be cut by 25 basis points, bringing the repo rate to 7% and the prime lending rate to 10.50%.

The decision to cut rates by 25 basis points was unanimous and comes after another low inflation outcome in June, which saw consumer price index at 3%.

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