Pace of rate hikes expected to slow

The pace of interest rate hikes is expected to slow, analysts say ahead of the first monetary policy announcement for the year by the Bank of Namibia (BoN) tomorrow. The repo rate increased by 300 basis points (bps) in 2022.At the last monetary policy announcement, the central bank hiked the repo rate by 50 basis points (bps) from 6.25% to 6.75%. The prime lending rate currently stands at 10.5%.The South African Reserve Bank (SARB) recently announced a 25 basis points increase in the repo rate from 7.0% to 7.25%. The prime lending rate currently stands at 10.75%.According to Ruusa Nandago, FirstRand Namibia Economist, “We expect rates to end the year at 7.25% and for the cutting cycle to begin in the first half of 2024. The trajectory of rate movements is highly dependent on the path of interest rate movements in South Africa, necessitated by the currency peg to the Rand.”In addition, Simonis Storm Economist Theo Klein expect one last 25bps repo rate hike by BoN, taking it from 6.75% to 7.00% and then for interest rates to remain unchanged at elevated levels until second half of 2024 when the first rate cut is expected.Moreover, PSG noted that “due to the necessity of keeping pace with South African interest rate movements, because of the Namibian dollar&#039;s one-to-one peg with the rand, we expect Namibia&#039;s apex bank to raise the repo rate by 50 bps to 7.25% in the first quarter of 2023 and, thereafter, to keep rates stable until end-2023.”InflationNamibia’s annual inflation averaged 6.1% in 2022, with December recording 6.9%. The Namibia Statistics Agency (NSA) will release the inflation figures for January 2023 tomorrow. Fin24 reported that annual consumer price inflation in South Africa cooled to 7.2% in December, down from 7.4% in November and 7.6% in October.“The South African Reserve Bank’s monetary policy committee targets price growth in a band of 3% to 6% and prefers to anchor expectations close to the midpoint of that range.”The Bank of Namibia does not target inflation.According to IJG Securities, December saw Namibia’s annual inflation rate continuing to trend lower with the print falling below 7.0% for the first time since July 2022 and steadily moving back towards the upper end of the SARB’s target range.Recent below-expectation inflation numbers coupled with lower fuel prices and moderating food prices should all provide the SARB, and by extension the BoN flexibility to slow the pace of rate hikes.IJG’s inflation model currently forecasts Namibia’s annual inflation rate to continue to steadily slow during the course of 2023, before reaching around 4.1% at the end of the year.PSG expects the average inflation rate to moderate to 5.0% this year. -phillep@nmh.com.na

Pace of rate hikes expected to slow

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Namibian Sun 2025-12-19

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Pace of rate hikes expected to slow

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Namibian Sun 2025-12-19

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