Christmas cheer for consumers The recent decision taken by the Monetary Policy Committee of the Bank of Namibia has given consumers a lot of reason for cheer according to stock broking agency, PSG Konsult. The committee this week elected to hold the repo rate steady at 7%.
Releasing its views, PSG said in a statement: “Namibia is technically in a rising interest rate cycle given that the central bank has increased the repo rate by 50 basis points since the start of this year and 100 since the start of 2015. However, given that inflation did not spiral out of control, the Namibian dollar has proved fairly resilient in the face of external headwinds in recent months, and key central banks have generally remained accommodative, the Bank of Namibia was afforded an opportunity to pause its hiking cycle. “Nevertheless, the outlook for monetary policy remains very uncertain and the exchange rate continues to be a significant upside risk to the inflation outlook. In recent months, the inflation rate kept close to 7% year-on-year and we still expect price pressures to remain elevated in 2017. The rand has been susceptible to bouts of weakness caused by flare-ups in political risk over the past year,” PSG said. Another source of depreciatory pressure on the rand is the substantial risk that South Africa will lose its investment-grade status during the course of 2017. Despite the recent decisions by credit rating agencies not to downgrade South Africa''s foreign currency credit rating, both S&P Global Ratings and Fitch Ratings now have the country on BBB- [and Baa3 ratings respectively] with a negative outlook. “Looking ahead, our baseline expectation is for the BoN to raise the repo rate by 25 basis points during 2017. This is on the back of our projected 50-point hike in the US federal funds rate next year, which will put pressure on the Namibian dollar, as well as our expectation of elevated food and administrated prices well into 2017,” PSG suggested laid in stock for the new year.
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