BoN February hike likely

Economic analysts are predicting a February hike as the Bank of Namibia (BoN) struggles to contain rising inflation. BoN predicted inflation to average 6.1% in 2022 and fall to 4.9% in 2023.

The central bank’s Monetary Policy Committee (MPC) will hold its first meeting of the year next month to decide on interest rates.

BoN raised interest rates by a cumulative 300bps in 2022 to combat rising inflation and maintain the one-to-one currency peg to the South African Rand.

Research firm Simonis Storm is forecasting a 25bps hike or for the repo rate to remain unchanged at the central bank’s next meeting.

“Initially, we expected a 50bps hike by BoN in February 2023, but now it seems likely for a 25bps hike or for the repo rate to remain unchanged at the next meeting. We believe a 25bps hike is more likely, as BoN progresses on a gradual reduction in the pace of rate hikes and reaching the end of the local hiking cycle. We still expect BoN to follow SARB with two 25bps cuts in 3Q2023 and 4Q2023.”

This comes as the South African Reserve Bank (SARB)’s Monetary Policy Committee on Thursday voted to hike interest rates by 25 basis points (bps), taking the country’s repurchase rate to 7.25%, increasing the prime lending rate to 10.75%.

SARB’s Thursday hike was in line with Simonis Storm’s projection of a 25bps hike as opposed to 50bps hike by SARB in January 2023 which is in line with the Forward Rate Agreement (FRA) curve which factors in about another 25bps hike in South Africa by the end of 1Q2023.

PSG Namibia, on the other hand, is forecasting a 50bps BoN hike.

“We expect the central bank will raise its policy rate by a further 50bps to 7.25% in Q1 2023, in line with the policy of the South African Reserve Bank which it closely follows.”

Despite analysts differing on the quantum of the interest rate hikes, what is certain is that individuals and businesses who have taken out debt, should expect a further increase in their debt servicing costs after 15 February.

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Last modified on Monday, 30 January 2023 18:23

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