Repo rate cut to bolster credit growth
STAFF REPORTER
Simonis Storm economist Almandro Jansen said a decision by the Bank of Namibia (BoN) to reduce the repo rate by 25 basis points is a mark of confidence that inflation is under control. Jansen made the remarks following the reduction, noting that it will also stimulate credit growth.
“It is a clear sign from the BoN that inflation is steady at 3.5%. The central bank sees the opportunity to support credit growth; the move will lower borrowing costs,” Simonis Storm economist Almandro Jansen said. FNB Namibia, in its analysis, said the BoN would be closely monitoring the South African Reserve Bank (SARB) to narrow the rate gap between the two central banks. “If the SARB accelerates rate cuts and narrows the rate gap, the BoN may need to adjust its policy to preserve macroeconomic stability. The BoN’s rate cut is unlikely to significantly affect PSCE but signals their cautious approach,” FNB Namibia said.
To continue supporting the domestic economy while safeguarding the peg between the Namibia dollar and the South African rand, the monetary policy committee (MPC) decided to reduce the repo rate by 25 basis points to 6.5%, the BoN said. “In determining the appropriate monetary policy stance, the committee considered the weaker domestic economic activity, well-contained inflation, and a favourable medium-term inflation outlook.”
According to the BoN, year-to-date capital outflows were assessed to be orderly. The relatively high real repo rate and adequate foreign reserves were also deemed supportive of a reduction in the nominal repo rate. “The MPC was wary that lowering the repo rate would widen the gap between the domestic policy rate and that of the anchor country, but it was of the view that the magnitude falls within the boundaries where capital movements remain well-contained,” the BoN said.
Moreover, while there is imminent pressure on foreign reserves due to the forthcoming Eurobond redemption, thorough preparation in anticipation of this event has ensured that Namibia’s foreign reserve adequacy is not jeopardised.
Simonis Storm economist Almandro Jansen said a decision by the Bank of Namibia (BoN) to reduce the repo rate by 25 basis points is a mark of confidence that inflation is under control. Jansen made the remarks following the reduction, noting that it will also stimulate credit growth.
“It is a clear sign from the BoN that inflation is steady at 3.5%. The central bank sees the opportunity to support credit growth; the move will lower borrowing costs,” Simonis Storm economist Almandro Jansen said. FNB Namibia, in its analysis, said the BoN would be closely monitoring the South African Reserve Bank (SARB) to narrow the rate gap between the two central banks. “If the SARB accelerates rate cuts and narrows the rate gap, the BoN may need to adjust its policy to preserve macroeconomic stability. The BoN’s rate cut is unlikely to significantly affect PSCE but signals their cautious approach,” FNB Namibia said.
To continue supporting the domestic economy while safeguarding the peg between the Namibia dollar and the South African rand, the monetary policy committee (MPC) decided to reduce the repo rate by 25 basis points to 6.5%, the BoN said. “In determining the appropriate monetary policy stance, the committee considered the weaker domestic economic activity, well-contained inflation, and a favourable medium-term inflation outlook.”
According to the BoN, year-to-date capital outflows were assessed to be orderly. The relatively high real repo rate and adequate foreign reserves were also deemed supportive of a reduction in the nominal repo rate. “The MPC was wary that lowering the repo rate would widen the gap between the domestic policy rate and that of the anchor country, but it was of the view that the magnitude falls within the boundaries where capital movements remain well-contained,” the BoN said.
Moreover, while there is imminent pressure on foreign reserves due to the forthcoming Eurobond redemption, thorough preparation in anticipation of this event has ensured that Namibia’s foreign reserve adequacy is not jeopardised.
