Economists divided over repo rate change

Economists are divided on whether the central bank will reduce or keep the repurchase rate (repo rate) when it makes its last repo rate announcement for the year today.

Economist Omu Kakujaha-Matundu says because the South African Reserve Bank (SARB) revised its inflation target downwards and Namibia’s inflation is still above target, the Bank of Namibia (BoN) could cut the rate.

“With the SARB adjustment or revision of the inflation target downwards from a band of 3% to 6% to a lower target of 3%, and with our Consumer Price Index (CPI) of about 3.4%, I strongly believe the BoN will cut the repo by 25 basis points (bps),” he says.

Kakujaha-Matundu says a cut will be a good stimulus for the slow-growing economy.

“Such a cut would make debt cheaper and would be good for the government, business, consumers and subsequently the whole economy – with a possible increase in employment,” he says.

Economist Robert McGregor, however, argues that because the difference between Namibia and South Africa’s repo rate is only 25bps, the central bank would not cut the repo rate.

“At this juncture, I expect no change to the repo rate. Following the SARB’s rate cut last month, the differential to Namibia has again reduced to 25bps, with the market now expecting two rate cuts in South Africa in 2026,” he says.

McGregor says given the reduction in reserves to just 3.2 months of import cover at the end of October after the Eurobond redemption, central banks would be wary of additional rate cuts.

Additionally, should the SARB continue its rate cutting cycle next year, there will be scope for the BoN to cut the repo in Namibia.

He says there will be some relief come January for those paying off loans.

“… as the remaining 12.5bps decrease between the repo rate and prime rate must be implemented by the end of this year,” McGregor says.

The current repo rate is 6.50%.

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