BoN cuts repo rate

19 February 2020 | Banking

Ruusa Nandago – As expected, the Monetary Policy Committee of the Bank of Namibia (BoN) cut interest rates by 25 basis points to 6.25%.
Domestic and financial developments informing the decision to lower the repo rate were because inflation continues to trend downwards, mainly owing to a slowdown in rent inflation and the bank expects that inflation will remain below 5% for 2020. Also, international reserves remain healthy at 4.4 months’ worth of import cover. Furthermore, growth in domestic credit extension remains moderate, mainly on account of borrowing by businesses in the real estate and financial sectors
Theoretically, interest rate cuts stimulate the economy through lower borrowing costs which induce borrowing and investment. While the recent rate cut brings moderate relief to indebted households and corporates, FirstRand Namibia does not believe it will be sufficient to drive meaningful economic growth in the current environment characterised by low confidence.
This view is corroborated by real sector data releases following the repo rate cut in August 2019, which did not show signs of significant improvement.
It is our opinion that the onus to stimulate meaningful economic growth does not lie in the repo rate adjustment alone, given the structural nature of the low growth environment. Rather, complementary policies that support growth and employment creation should be put in place for demand growth to systematically respond to monetary policy action.
This sentiment was echoed by the central bank Governor, who emphasised that interest rates are already at historically low levels.
The accommodative stance taken by the central bank comes at a time where regional peers including South Africa, Lesotho, Zimbabwe and Kenya have been cutting rates against a background of sluggish growth. The low inflation, flat credit uptake and the low growth environment support the case for further rate cuts. However, we believe interest rate decisions will likely be guided by those of South Africa’s, in order to prevent capital outflows needed to maintain the currency peg.
The next MPC meeting is scheduled for 15 April 2020.
Ruusa Nandago is an economist at FirstRand Namibia.

Similar News

 

Local bank announces repayment holidays

2 days ago - 31 March 2020 | Banking

“We are extending relief in the form of capital and interest repayment holidays for up to six months until 30 September 2020 to all our...

Bank waives app fees

2 days ago - 31 March 2020 | Banking

As of 1 April and until 30 June 2020, FNB will be making all transactions done on the FNB App completely free.This discount was announced...

BAN explains payment relief

3 days ago - 30 March 2020 | Banking

The Bankers Association of Namibia (BAN) has provided further clarity to customers on the case-by-case funding relief which is handled according to each bank’s respective...

Water tanks, hand sanitizers donated

3 days ago - 30 March 2020 | Banking

With life as we know it possibly changing, government and businesses alike should do their part. In the absence of a vaccine or cure, two...

Banks to help on case-by-case basis

1 week ago - 26 March 2020 | Banking

After extensive consultation with the Bank of Namibia (BoN), the Bankers Association of Namibia (BAN) has collectively advised on measurements put in place by all...

Keep banking like this

1 week ago - 26 March 2020 | Banking

In support of government’s approach to curb the spread of Covid-19, Bank Windhoek urges clients, stakeholders and the public at large to adhere strictly to...

Fill up and earn

1 week ago - 25 March 2020 | Banking

FNB Namibia Fleet Services launched a Commercial Card campaign in collaboration with Engen Namibia.Commercial Card holders can now fill up at any Engen and increase...

Digital banking in the comfort of your home

1 week ago - 24 March 2020 | Banking

As Namibians and the international community continue to intensify efforts to curb the spread of Covid-19, FNB says it is committed to help its customers...

New note to celebrate independence

1 week ago - 23 March 2020 | Banking

The Bank of Namibia (BoN) on Saturday launched a commemorative N$30 banknote in celebration of the country’s 30th Independence Day celebrations. The launch took place...

Prepping for an interview

3 weeks ago - 11 March 2020 | Banking

Chantelle Reid After applying for a position, you finally receive that call saying, “You have been shortlisted. Please join us for an interview”.This in itself...

Latest News

Germans back home

6 hours ago | Transport

Since Monday, German airline Lufthansa has repatriated close to 1 200 passengers to Germany from Namibia, due to the global Covid-19 outbreak.The airline said in...

Jy kan ver ry met...

7 hours ago | Art and Entertainment

Windhoek • [email protected] almal nou gehok is, is dit ’n tyd om dinge anders te doen en nuwe maniere te vind om jouself besig te...

Taking hands to wash hands

9 hours ago | Business

Windhoek • [email protected] Workshop Namibia and the Namibia Chamber of Environment have launched a joint emergency response to Covid-19 in Namibia and aims to set...

Tip that tap for your...

10 hours ago | Social Issues

RMB Namibia through the FirstRand Namibia Foundation Trust donated N$500 000 to assist a Covid-19 emergency response programme directly targeting Windhoek’s informal settlements.RMB Namibia’s chief...

Garden Town seeks former glory

10 hours ago | Infrastructure

Okahandja interim municipal council administrator Linus //Garoeb said will be a challenge to get the town to where it is used to be.At the moment...

Sport in the spotlight

11 hours ago | Sports

The African Union Sports Council (AUSC) Region 5 Council of Ministers Troika is convening an emergency risk assessment virtual meeting to discuss the devastating effects...

NAMDIA comes on board

1 day - 01 April 2020 | Business

NAMDIA, through its foundation, allocated N$2 million for the fight against Covid-19. Thus far, the funds have been allocated as follows:• N$1 million to government’s...

Lockdown no excuse to violate...

1 day - 01 April 2020 | Transport

Windhoek • [email protected] Roads Authority (RA) said the agency would only attend to applications for driving licence renewals for vehicles being used for the provision...

Work as usual

1 day - 01 April 2020 | Infrastructure

Windhoek • [email protected] current coronavirus pandemic raises questions and brings challenges regarding waste management practices and procedures, as well as safety and health measures for...

Load More