Interest rates up by 0,5%

THE Bank of Namibia (BoN) yesterday raised its key repo interest rate by 50 basis points to 9,5 per cent, attributing the move to rising inflationary pressures.

It is the first time this year that the key repo rate has been increased. Commercial banks are expected to raise their interest rates accordingly.Inflation went up to 6,9 per cent in April from 6,3 per cent in March, cited as the highest rate of inflation since July 2003 when annual inflation was 6,6 per cent.Addressing the media in Windhoek, BoN Deputy Governor Paul Hartmann said the current economic performance was strong enough to absorb tighter monetary conditions without any noticeable negative impact.”While tighter monetary conditions could moderate economic growth, the Bank believes that contained inflation is a more serious consideration at this stage than a situation of high economic growth with high inflation,” he said.The increase had been expected after the South African Reserve Bank – which guides local monetary policy – had announced a similar increase earlier yesterday.Namibia and South Africa share a Common Monetary Area (CMA) with Lesotho and Swaziland, and the Namibian dollar is pegged to the South African rand – the currency of the powerful neighbouring economy.The European Central Bank (ECB) also this week raised interest rates by a quarter of a percentage point to 2,25 per cent – the first change in rates for two years, citing rising inflation.Hartmann attributed the increase in inflation to rising fuel prices, which went up twice last month.These increases have been caused by volatile oil prices on the world market.Other factors that pose a threat to surging inflation were highlighted as food prices and uncertainties about regional weather conditions, which could lead to lower agricultural production.”As usual the Bank of Namibia will continue to closely monitor price developments and factors that induce price changes, and will adjust its policy stance should monetary conditions so demand in the interest of price stability,” said Hartmann.Commercial banks are expected to raise their interest rates accordingly.Inflation went up to 6,9 per cent in April from 6,3 per cent in March, cited as the highest rate of inflation since July 2003 when annual inflation was 6,6 per cent.Addressing the media in Windhoek, BoN Deputy Governor Paul Hartmann said the current economic performance was strong enough to absorb tighter monetary conditions without any noticeable negative impact. “While tighter monetary conditions could moderate economic growth, the Bank believes that contained inflation is a more serious consideration at this stage than a situation of high economic growth with high inflation,” he said.The increase had been expected after the South African Reserve Bank – which guides local monetary policy – had announced a similar increase earlier yesterday.Namibia and South Africa share a Common Monetary Area (CMA) with Lesotho and Swaziland, and the Namibian dollar is pegged to the South African rand – the currency of the powerful neighbouring economy.The European Central Bank (ECB) also this week raised interest rates by a quarter of a percentage point to 2,25 per cent – the first change in rates for two years, citing rising inflation.Hartmann attributed the increase in inflation to rising fuel prices, which went up twice last month.These increases have been caused by volatile oil prices on the world market.Other factors that pose a threat to surging inflation were highlighted as food prices and uncertainties about regional weather conditions, which could lead to lower agricultural production.”As usual the Bank of Namibia will continue to closely monitor price developments and factors that induce price changes, and will adjust its policy stance should monetary conditions so demand in the interest of price stability,” said Hartmann.