The Bank of Namibia announced on 28 October a rise in its key rate of 25 basis points, from 6.75% to 7%. The unanimous decision follows the meeting of its monetary committee on 26 and 27 October. It takes the prime lending rate to 10.5%.
The tightening addresses two related concerns: defending the parity between the Namibian dollar and the South African rand, and limiting second-round effects of high fuel prices. The bank also wants to narrow the interest rate gap with South Africa to contain potential capital outflows.
A change after the August hold
In August, it had chosen a different balance. The key rate had remained at 6.75% and the prime lending rate at 10.25%. The statement of 12 August linked that hold to weak economic activity, relatively moderate inflation prospects and foreign exchange reserves deemed sufficient.
These two rates serve different functions. The key rate is the cost at which private banks borrow Namibian dollars from the central bank. The prime lending rate serves as a benchmark for bank loans to the public. The move to 10.5% thus gives a concrete reference for credit conditions, without alone determining the rate on each contract.
Inflation forecasts revised upwards
The price outlook has meanwhile been revised. The bank now forecasts average inflation of 4.2% in 2026 and 4% in 2027, compared with 4% and 3.9% respectively in its previous forecasts. Its October report attributes this revision to the expected persistence of energy pressures.
Observed data and projections remain distinct. Annual inflation for September stood at 5.4%, while forecasts for October and November reach 5.5% and 5.7%. The next monetary committee meeting is scheduled for 7 and 8 December.