Martin Endjala
The Monetary Policy Committee (MPC) of the Bank of Namibia reduced interest rates by 25 basis points to 7% on Wednesday.
Consumers will now enjoy the relief of interest rates on mortgages and loans.
According to the central bank’s governor, Johannes !Gawaxab, the move is to continue supporting the domestic economy while safeguarding the peg between the Namibian dollar and the South African rand.
“This decision was reached following a comprehensive review of current and expected domestic, regional and global economic developments,” he explained.
This was the sixth and final bi-monthly meeting of the MPC for 2024.
He said monetary policy easing has progressed across most monitored economies since the last MPC meeting.
He noted that the US Federal Reserve, the European Central Bank, the Bank of England, the South African Reserve Bank (SARB), and the People’s Bank of China all reduced rates at their most recent MPC meetings.
Meanwhile, the Bank of Brazil and the Bank of Russia have tightened policy rates, while the Bank of Japan and the Bank of India have held rates steady.
In deciding on an appropriate course of action, he said, the MPC noted the most recent slowdown in inflation and welcomed the well-contained medium-term inflation outlook. However, risks to the forecast remained.
The MPC was further gratified by the moderate pickup in Private Sector Credit Extension (PSCE) growth, which, in its latest print, marginally outpaced the concurrent inflation rate.
Noting the relatively high level of domestic real interest rates, he cited the ongoing need to support the domestic economy, adequate foreign reserves, orderly capital flows, and recent monetary policy easing trends in key central banks.
Commercial banks are expected to reduce their lending rates by 25 basis points, bringing their prime rate to 10.75%.
In deciding on this policy stance, he mentioned that the MPC also considered the policy rate differential with the SARB, with a keen desire to close the gap over the medium term.
Furthermore, the committee welcomed the current fiscal policy stance, which supports macroeconomic stability, underlining the importance of the government’s growth-friendly fiscal path and investment in growth-enhancing initiatives.
He explained that the MPC deliberated on the potential implications of the SARB’s proposed downward revision of its inflation target for South Africa and Namibia’s monetary policy and inflation trajectories.
The next MPC meeting will be held on 10 and 11 February 2025. With inflation said to have slowed from 3.4% in September to 3.0% in October 2024, it is the lowest since February 2021.
