Africa-Press – Namibia. LOCAL analysts have said the Bank of Namibia (BoN) will certainly raise the benchmark interest rate today, with estimates ranging from 50 to 75 basis points.
LOCAL analysts have said the Bank of Namibia (BoN) will certainly raise the benchmark interest rate today, with estimates ranging from 50 to 75 basis points.
This will be the bank’s third announcement this year, and will be a decision at policy level on how the central bank will play a part in carving a path that will curtail inflation, which was recorded at 6,8% at the end of July.
The central bank has already upped the repo rate by 100 basis points since the beginning of the year, and is now at 4,75%.
This has brought the prime rate to 8,5%, and if upped, will most likely have the lending rates breaching 10%.
Simonis Storm Securities analyst Theo Klein says he expects the BoN to follow the South African Reserve Bank (SARB) by also hiking the repo rate by 75 basis points tomorrow.
“Interest rate hikes in South Africa are mainly due to two reasons. Firstly, it’s to try and limit rand weakness by improving or maintaining trade returns with the US dollar.
“A weaker rand in itself is inflationary, and so the SARB would want to limit its weakness” he says.
Klein says interest rates are hiked to send signals to economic agents that high inflation won’t persist, so that inflation expectations are managed.
The SARB would not want to have inflation expectations drifting above its inflation target, as this could lead to second-round inflationary effects which are typically realised through wage negotiations.
“Inflation is still driven by supply-side factors, which are not affected by interest rates.
“But the two points above explain why we are still seeing interest-rate hikes in South Africa, and as a result, in Namibia as well,” he says.
Monika Kristoff, an economist at High Economic Intelligence, says she would like the benchmark rate to be upped by just 25 basis points.
She says this would assist in controlling inflation, and would also, if low, help to improve private sector credit extension to allow for further economic activity.
Other analysts have indicated they all expect the repo to be increased, but not by how much.
Letshego Namibia chief executive officer Ester Kali says she expects the central bank to rest at 75 basis points.
A higher repo rate will continue to subdue private-sector credit extension, and will hamstring economic growth further.
Globally, the trend is that most central banks are increasing their benchmark rates in an attempt to beat inflation, which has unfortunately slipped over the past few months.
The International Monetary Fund has said the war-induced commodity price increases and broadening price pressures have led to 2022 inflation projections of 5,7% in advanced economies, and 8,7% in emerging-market and developing economies.
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This will be the bank’s third announcement this year, and will be a decision at policy level on how the central bank will play a part in carving a path that will curtail inflation, which was recorded at 6,8% at the end of July.
The central bank has already upped the repo rate by 100 basis points since the beginning of the year, and is now at 4,75%.
This has brought the prime rate to 8,5%, and if upped, will most likely have the lending rates breaching 10%.
Simonis Storm Securities analyst Theo Klein says he expects the BoN to follow the South African Reserve Bank (SARB) by also hiking the repo rate by 75 basis points tomorrow.
“Interest rate hikes in South Africa are mainly due to two reasons. Firstly, it’s to try and limit rand weakness by improving or maintaining trade returns with the US dollar.
“A weaker rand in itself is inflationary, and so the SARB would want to limit its weakness” he says.
Klein says interest rates are hiked to send signals to economic agents that high inflation won’t persist, so that inflation expectations are managed.
The SARB would not want to have inflation expectations drifting above its inflation target, as this could lead to second-round inflationary effects which are typically realised through wage negotiations.
“Inflation is still driven by supply-side factors, which are not affected by interest rates.
“But the two points above explain why we are still seeing interest-rate hikes in South Africa, and as a result, in Namibia as well,” he says.
Monika Kristoff, an economist at High Economic Intelligence, says she would like the benchmark rate to be upped by just 25 basis points.
She says this would assist in controlling inflation, and would also, if low, help to improve private sector credit extension to allow for further economic activity.
Other analysts have indicated they all expect the repo to be increased, but not by how much.
Letshego Namibia chief executive officer Ester Kali says she expects the central bank to rest at 75 basis points.
A higher repo rate will continue to subdue private-sector credit extension, and will hamstring economic growth further.
Globally, the trend is that most central banks are increasing their benchmark rates in an attempt to beat inflation, which has unfortunately slipped over the past few months.
The International Monetary Fund has said the war-induced commodity price increases and broadening price pressures have led to 2022 inflation projections of 5,7% in advanced economies, and 8,7% in emerging-market and developing economies.
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