| BoN leaves bank rate unchanged at 10.5% |
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| Written by Staff Reporters | |
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The Bank of Namibia has decided to maintain its bank rate at 10.5%, a figure that has prevailed since November last week.
Governor Tom Alweendo told reporters in Windhoek this
week that although the inflation rate has been rising, the bank remains
confident about the currency peg as a nominal anchor to ensure
long-term price stability.
He said since June, Namibia’s international reserves further strengthened from N$9.3 billion to N$11.5 billion, which he said is more than sufficient to sustain the currency peg. “Moreover, fiscal policy, a key requirement in respect to exchange rate targeting has so far been prudent and supportive of the currency peg,” Alweendo said. He said inflation accelerated from 9.7% in May to 11.9% in July mainly due to a sharp rise in transport inflation as a result of high oil prices. “Growth in other domestic demand indicators, such as credit extension to the private sector and motor vehicles sales remain subdued indicating that past policy action by the Bank of Namibia, was successful in curbing price pressure originating from domestic sources,” he said. Alweendo said it is believed that the decision not to change the bank rate does not pose a threat to the reserves outlook and hence the currency peg. However, at the same time, the Bank of Namibia remains vigilant about the importance of price stability, and will not hesitate to use instruments at its disposal to defend the peg and ensure this. Alweendo said there are signs that global demand has started to taper off, which would hopefully lead to a decline in certain commodity prices. “In this connection, there has already been a significant decline in international crude oil prices, from a peak of US$148 per barrel in July to US$113 on 20 August, which should provide relief to inflationary pressures going forward. Moreover, there have been welcome reductions in certain food commodity prices, such as dairy products, cereals and sugar,” he said. Namibia normally followed South African monetary decisions until December last year. The Bank of Namibia left its benchmark interest rate unchanged since then choosing to sustain economic growth rather than tighten control on inflation. The bank has kept rates on hold since December, deviating from its usual policy of tracking rate actions taken by the central bank in neighbouring South Africa, where interest rates have increased six times since June last year. The repurchase rate in South Africa is 12%. |
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