CHAMWE KAIRA
Simonis Storm stockbroker and wealth management has projected that inflation will stabilise at approximately 4.7% year on year by the end of this year.
Furthermore, Simonis expects an additional 25 basis point rate cut at the December Monetary Policy Committee (MPC) meeting, bringing the year-end repo rate to 7.25%. The central bank is likely to adopt a cautious stance, closely monitoring the effects of this monetary easing before considering further policy adjustments, the firm noted.
The current repo rate in Namibia stands at 7.50%, with the prime lending rate at 11.25%.
Simonis said that although these rates remain high, the recent reduction provides some relief to Namibian households and businesses by easing borrowing costs. In comparison, South Africa’s repo rate is currently 8%, while the prime lending rate stands at 11.50%.
“Despite these adjustments, we anticipate that private sector credit extension growth will remain modest in the near term due to the lag effect of interest rate changes, as it typically takes time for the full impact to permeate the broader economy,” the firm said.
The Bank of Namibia’s Monetary Policy Committee will convene for its next meeting on 23 October. The South African Reserve Bank (SARB) has scheduled its next MPC meeting for 21 November.
“Given the current economic conditions in South Africa, we also anticipate a 25 basis point rate cut at that meeting. This gradual approach to rate cuts is intended to support both corporate and household sectors while ensuring that inflation remains under control, fostering a more favourable credit environment,” the firm said.
The Bank of Namibia has also projected that going forward, overall inflation is projected to slow to 4.7% in 2024 and 4.4% in 2025 from the average of 5.9% in 2023.
“The projected slowdown in inflation is attributed to lower fuel prices as well as the appreciation of the currency when compared to major trading currencies,” the central bank said.
Last month, the SARB decided to cut the repo rate by 25 basis points, bringing it down to 8%. This was the first cut since 2020.
Reserve Bank Governor, Lesetja Kganyago, said the forecast sees rates moving towards neutral next year, stabilising slightly above 7%.
“As before, the rate path from the quarterly projection model remains a broad policy guide, changing from meeting to meeting. Decisions of the MPC will continue to be data-dependent and sensitive to the balance of risks to the outlook,” Kganyago said.
