No rate hike for now, says central bank

IN a bold move, the Bank of Namibia (BoN) yesterday diverted from the Common Monetary Area (CMA) norm and left the bank rate unchanged at 10,5 per cent – a move welcomed by weary consumers.

The BoN cited favourable local e co no m ic co ndi t ion s including declining inflation fo r the dec is io n a nnoun ced yesterday. South African Reserve Bank (SARB) Governor Tito Mboweni yesterday increased its repo rate by 50 basis points to 11 per cent in line with economists’ expectations because of increasing inflation in that country.Many had predi cted t ha t Namibia would follow suit as usual.South Afri ca has a major economic inf l uence on Namibia as the country imports the majority of its goods from South Africa, and the Namibian dollar is pegged to the South African rand.Inflation in South Africa has been going up while Namibia’s inflation has for the past three months been decreasing.Annual inflation was down at 6,6 per cent in October compared to 7,2 per cent recorded in July.South Africa consumers have also been hit with fuel price increases – the latest being this week – yet Namibians last had a petrol price increase in July.BoN Governor Tom Alweendo told journalists yesterday the current local economic situation mattered most when coming up with a decision, and BoN would not simply follow SA’s decisions when the economic situations of the two countries were not the same.”The bank has taken a policy decision that its rate could deviate from the South African repo rate to some extent, without disrupting capital flows in the context of the CMA arrangement.In light of these developments, the Bank of Namibia has decided to leave the bank rate unchanged at 10,5 per cent per annum, for now.”Namibia’s economy has been performing satisfactorily, supported by growth in the global economy and rising commodity prices.Alweendo was quick to add that BoN would continue to “closely” monitor price developments, and would adjust its policy stance should monetary conditions demand.Data showed that Namibians were borrowing less, and according to Alweendo, that indicated that the monetary policy implemented in recent months was working.The central bank Governor also said since the four commercial banks (only one is wholly Namibian owned) were operating within Namibia under the same economic factors, it was expected that they would also not hike their prime lending rates.The last policy decision in October saw the prime lending rate go up to 15,25 per cent.This move by the BoN came as a relief to many who had expected to tighten their belts.However, Alweendo said inflation was under possible threat posed by fuel prices, which were likely to increase soon given international developments.South African Reserve Bank (SARB) Governor Tito Mboweni yesterday increased its repo rate by 50 basis points to 11 per cent in line with economists’ expectations because of increasing inflation in that country.Many had predi cted t ha t Namibia would follow suit as usual.South Afri ca has a major economic inf l uence on Namibia as the country imports the majority of its goods from South Africa, and the Namibian dollar is pegged to the South African rand.Inflation in South Africa has been going up while Namibia’s inflation has for the past three months been decreasing.Annual inflation was down at 6,6 per cent in October compared to 7,2 per cent recorded in July.South Africa consumers have also been hit with fuel price increases – the latest being this week – yet Namibians last had a petrol price increase in July.BoN Governor Tom Alweendo told journalists yesterday the current local economic situation mattered most when coming up with a decision, and BoN would not simply follow SA’s decisions when the economic situations of the two countries were not the same.”The bank has taken a policy decision that its rate could deviate from the South African repo rate to some extent, without disrupting capital flows in the context of the CMA arrangement.In light of these developments, the Bank of Namibia has decided to leave the bank rate unchanged at 10,5 per cent per annum, for now.”Namibia’s economy has been performing satisfactorily, supported by growth in the global economy and rising commodity prices.Alweendo was quick to add that BoN would continue to “closely” monitor price developments, and would adjust its policy stance should monetary conditions demand.Data showed that Namibians were borrowing less, and according to Alweendo, that indicated that the monetary policy implemented in recent months was working.The central bank Governor also said since the four commercial banks (only one is wholly Namibian owned) were operating within Namibia under the same economic factors, it was expected that they would also not hike their prime lending rates.The last policy decision in October saw the prime lending rate go up to 15,25 per cent.This move by the BoN came as a relief to many who had expected to tighten their belts.However, Alweendo said inflation was under possible threat posed by fuel prices, which were likely to increase soon given international developments.