Key interest rates go up – again

CONSUMERS will have to tighten their belts as the Bank of Namibia (BoN) yesterday raised its key repo rate by 50 basis points to 10 per cent.

It was the second interest rate hike this year, That means commercial banks will increase prime lending rates to 14,75 per cent from 14,25 per cent. The increase had been expected and the decision was in line with forecasts made by local economists, who predicted the 50 basis point hike given the current economic environment.In June, BoN increased the bank rate by 50 basis points to 9,5 per cent also citing rising inflationary pressures.However, despite the tighter domestic monetary conditions, inflation last month went up to 7,2 per cent from seven per cent recorded in June this year.BoN Assistant Governor Ipumbu Shiimi yesterday said the raise was due to deterioration in the inflation outlook.”From the review of the recent economic developments, the Bank of Namibia noticed with concern the increase in the inflation rate since the last monetary policy meeting.The risk to inflation, therefore, remains on the upside.The Bank of Namibia is also concerned about the risks of second-round effects of food and oil price inflation on the overall level of inflation.”The Bank of Namibia is thus of the opinion that an increase in the bank rate is necessary to lessen the risks posed by these factors on inflation,” he said.Shiimi noted that inflation has been surging due to persistently high and volatile international oil prices – which drive inflation in oil-importing countries such as Namibia.Crude oil prices have been hovering around US$74 (N$555) per barrel since last month.In terms of food price inflation, higher maize prices are expected to affect meat prices significantly due to its impact on the price of fodder.In spite of these developments, Shiimi said preliminary estimates revealed that economic activities in Namibia were continuing to show a positive performance.”Most of the sub-sectors have gained stronger growth momentum compared to the previous quarter (January to March),” he said.The favourable economic conditions are in line with international trends.The global economy has continued to expand at a healthy pace during the second quarter of the year, despite tight monetary policies adopted in most countries.Africa’s economy also looks positive and according to the International Monetary Fund, the region’s growth is expected to increase to 6,9 per cent this year from 5,5 per cent last year.The increase had been expected and the decision was in line with forecasts made by local economists, who predicted the 50 basis point hike given the current economic environment.In June, BoN increased the bank rate by 50 basis points to 9,5 per cent also citing rising inflationary pressures.However, despite the tighter domestic monetary conditions, inflation last month went up to 7,2 per cent from seven per cent recorded in June this year. BoN Assistant Governor Ipumbu Shiimi yesterday said the raise was due to deterioration in the inflation outlook.”From the review of the recent economic developments, the Bank of Namibia noticed with concern the increase in the inflation rate since the last monetary policy meeting.The risk to inflation, therefore, remains on the upside.The Bank of Namibia is also concerned about the risks of second-round effects of food and oil price inflation on the overall level of inflation.”The Bank of Namibia is thus of the opinion that an increase in the bank rate is necessary to lessen the risks posed by these factors on inflation,” he said.Shiimi noted that inflation has been surging due to persistently high and volatile international oil prices – which drive inflation in oil-importing countries such as Namibia.Crude oil prices have been hovering around US$74 (N$555) per barrel since last month.In terms of food price inflation, higher maize prices are expected to affect meat prices significantly due to its impact on the price of fodder.In spite of these developments, Shiimi said preliminary estimates revealed that economic activities in Namibia were continuing to show a positive performance.”Most of the sub-sectors have gained stronger growth momentum compared to the previous quarter (January to March),” he said.The favourable economic conditions are in line with international trends.The global economy has continued to expand at a healthy pace during the second quarter of the year, despite tight monetary policies adopted in most countries.Africa’s economy also looks positive and according to the International Monetary Fund, the region’s growth is expected to increase to 6,9 per cent this year from 5,5 per cent last year.