No interest rate relief expected

Jo-Maré Duddy - Analysts approached by Market Watch expect the Bank of Namibia (BoN) to keep its repo rate unchanged at 6.75% at its monetary policy announcement tomorrow.
That will keep the prime lending rate of local commercial banks unchanged at 10.5%.
“We do not expect any change tomorrow largely due to the South African Reserve Bank (SARB) holding rates steady at their previous meeting. This removes any pressure from BoN to hike rates for the time being,” says Eric van Zyl, research head at IJG Securities.
The level of foreign reserves is within a range where BoN has previously not seen the need to hike rates to protect the reserve position, he continues.
“The fact that the economy is still struggling means that BoN will be reluctant to raise rates unless prompted to do so by the SARB hiking rates,” Van Zyl says.
Dylan van Wyk, senior analyst at Cirrus Capital, says the expectation is for BoN to keep its interest rates in line with South Africa.
“The Namibian repo rate is currently 25 basis points higher than the South African repo rate, thus BoN has scope to keep the rate unchanged for now and raise the rate in October should the SARB increase rates in September.
“The market is however only pricing in a 25 basis points increase in the South African repo rate by November. However, this expectation may move closer given the current rand weakness which, if continued, may spark inflationary concerns,” Van Wyk says.
Indileni Nanghonga, analyst at Simonis Storm, says the BoN will take the “tough economic growth environment” into consideration and won’t want burden an already struggling consumer.
“The currency depreciation to 14.20 between the rand and the US dollar as a result of emerging market risk escalation is not sufficient enough to trigger a rate hike tomorrow,” Nanghonga says.