Market expects BoN rate cut of 1%

EXPECTATIONS that the Bank of Namibia (BoN) will cut its repo rate next week are growing and some market observers have already provided for lower rates in their forecasts.

In their Daily Market Analysis, Investment House Namibia (IHN) predicts that the bank rate will be cut by 100 basis points to seven per cent this month. The stock brokers anticipate a further cut of one percentage point in June, resulting in a repo of six per cent.
In comparison, IHN expects the South African Reserve Bank (SARB) to drop its repo from 8,5 per cent to 7,5 per cent by next month.
The BoN on Wednesday hinted at an earlier review of its monetary policy when the Executive Committee (EC) meets to review foreign reserve levels next Tuesday and Wednesday. The EC was only scheduled to look at rates again at their meeting on June 17.
Talking about the BoN’s recent interest rate decisions when he launched the bank’s first Monetary Policy Review, Deputy Governor Paul Hartmann referred to ‘May 20’ with a question mark. He said although the EC will officially meet to discuss the foreign reserves situation, they may also consider rates and make the necessary adjustments if the economic environment justifies it.
SARB has already moved away from a two-monthly review of its monetary policy. SARB Governor Titi Mboweni announced earlier this year that the bank decided to rather meet monthly to monitor the rapidly changing economic environment and its effect on growth, jobs and inflation.
A BoN cut in its repo rate, the rate at which commercial banks borrow from the central bank, will lead to a lower prime lending rate for the consumer. Namibia’s prime lending rate currently is 12,75 per cent.
Namibia has the third lowest prime rate in the Southern African Development Community (SADC), according to Standard Bank’s economics research group.
Better rates are only offered by Swaziland (12,5 per cent) and South Africa (12 per cent), the bank’s latest Africa in Numbers states.
Eight other African countries offer prime rates lower than 20 per cent: Kenya (14,22 per cent), Lesotho (14,5 per cent), Tanzania (14,95 per cent), Mozambique (15,83 per cent), Botswana (16,5 per cent) and Malawi (19,25 per cent).
Uganda, Zambia and Ghana follow with 20,7 per cent, 26,95 per cent and 27,25 per cent respectively.
The Democratic Republic of the Congo (DRC) has the highest prime rate in SADC: a staggering 70 per cent.
No comparative figures were available for Zimbabwe and Mauritius.