CHAMWE KAIRA
Simonis Storm Security projections suggest that inflation will stabilise at around 4.9% by the end of the year.
The Bank of Namibia’s monetary policy committee decided to implement a 25 basis point rate cut at its last meeting, reducing the repo rate to 7.50% and the prime rate to 11.25%.
Simonis said although these rates remain relatively elevated, the reduction offers some relief to Namibian households and businesses by lowering borrowing costs.
“Despite this rate cut, we anticipate that private sector credit extension growth will remain modest in the near term. This is due to the lag effect of interest rate changes, where it typically takes some time for the impact of rate adjustments to fully materialise in the broader economy,” Simonis said.
Looking ahead, Simonis projections suggest that inflation will stabilize at around 4.9% year on year by the end of 2024.
“Additionally, we foresee another 25 basis point rate cut at the December monetary policy meeting, which would bring the year-end interest rate to 7.25%. We expect the central bank to carefully observe the outcomes of this monetary easing before considering any further policy changes,” the firm said.
The South African Reserve Bank (SARB) on the other hand has said it decided to keep the repo rate unchanged at 8.25%. Four members of its monetary committee preferred an unchanged stance, and two preferred a reduction of 25 basis points.
The SARB said its monetary committee agreed that restrictive policy remains appropriate to stabilise inflation at 4.5%. The committee assessed that an unchanged stance remained appropriate, given the inflation risks. Some members, however, were of the view that the inflation outlook had improved enough to reduce the degree of restrictiveness.
The SARB noted that the global interest rates remain high, especially in the United States, and rates may stay higher for even longer than markets currently anticipate. This presents risks to the currency outlook, it said.
“Domestically (South Africa), inflation expectations do not yet reflect the 4.5% midpoint objective over the medium term. While expectations are moving in the right direction, they continue to show the impact of the recent inflation surge. We remain concerned about administered prices. We have had to markup electricity inflation for this forecast round, even as other categories shifted lower.”
The SARB said services price inflation also remains uncomfortably above the mid-point and the forecast continues to see rates easing into more neutral territory by next year.
“We are committed to stabilising inflation at the mid-point of the target band. Achieving this outcome will improve the economic outlook and reduce borrowing costs,” the SARB said.
