Interest rates up – BoN warns of inflation

FOR the third time this year, the Bank of Namibia (BoN) has raised its repo rate by another 50 basis points to reach 8,5 per cent, and has also warned against surging inflation.

This means that short-term interest rates charged by commercial banks in Namibia will increase by at least 0,5 per cent tomorrow, pushing the local prime rate to at least 13,25 per cent. As had been forecast by analysts and in line with South Africa, BoN Governor Tom Alweendo yesterday said: “Following a review and discussions about the recent domestic and international economic developments, the Monetary Management Committee (MMC) of the Bank of Namibia at its meeting decided to increase the bank rate by 50 basis points…”Alweendo said inflationary pressure was a major driver behind the raising of the bank rate, adding that the rising inflation was worrisome.”The inflation outlook does not look well.It is a cause for concern and the indication is that it’s not likely to come down (soon).”Inflation has been on the rise since the beginning of the year and was recorded at 5,4 per cent in August compared to 5,1 per cent in July.Alweendo also said that an increase of the South African Producer Price Index was adding to the inflationary pressures for Namibia.”Given the significance of the imported inflation from South Africa to Namibia, the soaring of the South African Producer Price Index is a matter of concern,” he said.Producer inflation in South Africa rose to 9,2 per cent in August from a rate of 8,1 per cent in July.The unstable international oil prices and weakening of the Namibian dollar were also cited as other factors that could drive up inflation.The local currency, which has depreciated by 23 per cent since May this year, was trading at 7,66 against the US dollar at 14:00 yesterday.Said Alweendo: “Although the depreciating of the domestic currency is expected to have a positive impact on the exporting industries as Namibian products become more competitive abroad, the adverse impact on inflation is matter of concern.”Given these developments, the MMC felt it necessary to take an appropriate monetary policy stance to mitigate the risks posed by these factors on inflation.”As had been forecast by analysts and in line with South Africa, BoN Governor Tom Alweendo yesterday said: “Following a review and discussions about the recent domestic and international economic developments, the Monetary Management Committee (MMC) of the Bank of Namibia at its meeting decided to increase the bank rate by 50 basis points…”Alweendo said inflationary pressure was a major driver behind the raising of the bank rate, adding that the rising inflation was worrisome.”The inflation outlook does not look well.It is a cause for concern and the indication is that it’s not likely to come down (soon).”Inflation has been on the rise since the beginning of the year and was recorded at 5,4 per cent in August compared to 5,1 per cent in July.Alweendo also said that an increase of the South African Producer Price Index was adding to the inflationary pressures for Namibia.”Given the significance of the imported inflation from South Africa to Namibia, the soaring of the South African Producer Price Index is a matter of concern,” he said.Producer inflation in South Africa rose to 9,2 per cent in August from a rate of 8,1 per cent in July.The unstable international oil prices and weakening of the Namibian dollar were also cited as other factors that could drive up inflation.The local currency, which has depreciated by 23 per cent since May this year, was trading at 7,66 against the US dollar at 14:00 yesterday. Said Alweendo: “Although the depreciating of the domestic currency is expected to have a positive impact on the exporting industries as Namibian products become more competitive abroad, the adverse impact on inflation is matter of concern.”Given these developments, the MMC felt it necessary to take an appropriate monetary policy stance to mitigate the risks posed by these factors on inflation.”