Repo rate expected to hold steady in June
The Bank of Namibia (BoN) is expected to keep the repo rate unchanged ahead of a monetary policy committee slated for 17 June, stockbroking firm Simonis Storm said in its latest private sector credit extended (PSCE) report.
The firm made the assessment on the assumption that the current inflation rate of 3.6% leaves the central bank some space to control the repo rate.
“In our view, BoN is likely to keep the repo rate unchanged at 6.75% during its upcoming June 2025 Monetary Policy Committee meeting. With inflation easing to 3.6% in April, the central bank has a little more breathing room, but not quite enough to act,” it said.
The central bank is expected to lower the interest rates before the end of the year, likely in moderation, Simonis Storm said.
“We continue to expect that the BoN may lower interest rates by up to 25 basis points before the end of the year, most likely during the second half of 2025. But the timing will be highly dependent on whether inflation continues to moderate, the Namibia dollar remains stable, and South Africa’s monetary policy stance remains aligned. As part of the Common Monetary Area, Namibia has little room to diverge from the path of its southern neighbour without risking macro-financial imbalances,” Simonis Storm said.
Inflation expected to further moderate
“Importantly, the South African Reserve Bank (SARB) cut its repo rate by 25 basis points last week, bringing it down to 7.25% - its first rate cut of the year. This marks a potential turning point for the region’s monetary stance and could open the door for the BoN to follow suit. However, any misalignment between the two countries' rates could weaken the Namibia dollar against the rand, raising the risk of imported inflation,” it added.
The central bank was expected to exercise due caution concerning setting a price level that would not only preserve external stability but also protect the one-to-one peg between the Namibia dollar and the South African rand.
“The BoN will therefore proceed cautiously, sequencing any policy changes to preserve external stability and protect the currency peg. Going forward, the BoN will be paying close attention to several interconnected factors,” Simonis Storm said.
“These include the path of imported inflation especially for fuel and food, the outlook for commodity exports such as uranium and diamonds, movements in global capital flows, and the stance of major central banks like the US Federal Reserve and the European Central Bank,” it added.
The firm made the assessment on the assumption that the current inflation rate of 3.6% leaves the central bank some space to control the repo rate.
“In our view, BoN is likely to keep the repo rate unchanged at 6.75% during its upcoming June 2025 Monetary Policy Committee meeting. With inflation easing to 3.6% in April, the central bank has a little more breathing room, but not quite enough to act,” it said.
The central bank is expected to lower the interest rates before the end of the year, likely in moderation, Simonis Storm said.
“We continue to expect that the BoN may lower interest rates by up to 25 basis points before the end of the year, most likely during the second half of 2025. But the timing will be highly dependent on whether inflation continues to moderate, the Namibia dollar remains stable, and South Africa’s monetary policy stance remains aligned. As part of the Common Monetary Area, Namibia has little room to diverge from the path of its southern neighbour without risking macro-financial imbalances,” Simonis Storm said.
Inflation expected to further moderate
“Importantly, the South African Reserve Bank (SARB) cut its repo rate by 25 basis points last week, bringing it down to 7.25% - its first rate cut of the year. This marks a potential turning point for the region’s monetary stance and could open the door for the BoN to follow suit. However, any misalignment between the two countries' rates could weaken the Namibia dollar against the rand, raising the risk of imported inflation,” it added.
The central bank was expected to exercise due caution concerning setting a price level that would not only preserve external stability but also protect the one-to-one peg between the Namibia dollar and the South African rand.
“The BoN will therefore proceed cautiously, sequencing any policy changes to preserve external stability and protect the currency peg. Going forward, the BoN will be paying close attention to several interconnected factors,” Simonis Storm said.
“These include the path of imported inflation especially for fuel and food, the outlook for commodity exports such as uranium and diamonds, movements in global capital flows, and the stance of major central banks like the US Federal Reserve and the European Central Bank,” it added.
