Namibia raises main lending rate by 75 basis points

Namibia’s central bank on Wednesday raised its main lending rate by 75 basis points to 5.50%, tightening policy further in response to rising inflation and matching a move by South Africa’s central bank last month.

The Bank of Namibia typically mirrors rate decisions by the South African Reserve Bank to safeguard the 1:1 link between the Namibian dollar and South African rand.

Namibia’s annual inflation climbed to 6.8% in July from 6.0% in June, with food and fuel among major contributors.

“The decision was taken with due consideration of the persistent inflationary pressures, – the adopted monetary policy stance is necessary to narrow the current negative real policy interest rate,” deputy governor Ebson Uanguta said.

Inflation is now forecast to average around 5.8% for the year, down slightly from the 5.9% forecast at the last Monetary Policy Committee (MPC) meeting in June.

The Bank of Namibia expects the domestic economy to grow around 3.2% in 2022, up from an estimate of 3% at the last MPC meeting, mainly driven by a recovery in the mining, electricity, water and tourism sectors.

The South African central bank’s rate hike last month was its biggest in two decades.