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Namibia central bank announces to maintain rates, warns of significant inflation rise.

TraderKnows
TraderKnows
06-20

This Wednesday, the Bank of Namibia announced that it would maintain the current key interest rate, primarily to address the recent significant rise in inflation.

The Bank of Namibia decided on Wednesday to keep the key interest rate unchanged, a move aimed at addressing a slight rise in inflation and protecting the currency's peg to the South African rand.

The repo rate has been maintained at 7.75% since June 2023. The consumer price index rose annually to 4.9% in May, up slightly from 4.8% in April and 4.5% in March.

Johannes Gawaxab, Governor of the Bank of Namibia, stated in a release: "The Monetary Policy Committee is mindful of the recent worsening of inflation, which could jeopardize the progress made over the past year in controlling inflation and maintaining price stability."

He pointed out that the domestic economic outlook is at risk due to factors such as drought and falling diamond prices on the international market.

Namibia is a major diamond producer and also holds significant reserves of lithium and rare earth minerals used in electric vehicles and wind turbines.

The central bank forecasts an average inflation rate of 4.9% for this year, consistent with the projection from the April Monetary Policy Committee meeting.

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Interest rate cut

A rate cut refers to the central bank adjusting the interest rate level so that it is lower than before, as a form of monetary policy. It is a means by which the central bank affects the supply and demand relationship in the money market, money creation, and the level of interest rates by changing the level of interest rates. Rate cuts are usually used to counter inflation, stimulate economic growth, or alleviate economic downturn pressures.

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