Bank of Namibia Lowers Key Rate to 6.5%

The Bank of Namibia left its benchmark repo rate steady at 6.5% in December 2025, following a 25 bps cut in October, aiming to safeguard the Namibian Dollar’s peg to the South African Rand while supporting domestic growth. Policymakers highlighted ongoing global policy uncertainty and potential risks to the domestic economy. While welcoming South Africa’s lower inflation target as supportive of Namibian price stability, the central bank stressed that SA’s formal 3% target requires vigilance in managing domestic inflation to protect the exchange rate peg. Domestically, the central bank noted that despite slower economic activity, the outlook remains positive, with inflation well-contained and growth expected to recover over the medium term. Real GDP growth is now projected at 3% in 2025, 0.5 points below the previous forecast, before accelerating to 3.8% in 2026 and 4.3% in 2027. The 2025 inflation forecast remains at 3.6%, while the 2026 projection has been revised down to 3.8%.

The Bank of Namibia cut its benchmark repo rate by 25bps to 6.5% during its October 2025 meeting, aiming to support the domestic economy while safeguarding the peg between the Namibia Dollar and the South African Rand. Annual GDP growth has surprised on the downside, slowing to a post-pandemic low of 1.6% in the second quarter from 2.8% in the previous quarter, largely due to weak performance in the manufacturing, fishing, and agriculture sectors. Economic growth for 2025 is now projected to weaken from the 3.7% recorded in 2024, with downside risks becoming more pronounced. Meanwhile, inflation remains well contained, averaging 3.6% during the first eight months of the year. Inflation forecasts for both 2025 and 2026 have been revised down by 0.2 percentage point to 3.6% and 4.0%, respectively, reflecting a stronger exchange rate assumption and a lower oil price outlook.

Namibia's central bank maintained its key lending rate steady at 6.75% during its August 2025 meeting, marking a third straight hold since April. Policymakers said the decision was designed to safeguard the Namibian Dollar’s peg to the South African Rand while supporting domestic growth. By standing pat following South Africa’s July rate cut, Namibia has further closed the interest rate gap, with its repo rate now 25 basis points lower—an advantage the MPC believes will aid growth while preserving capital flow stability. Namibia's inflation rate edged down to 3.5% in July 2025 from 3.7% in June. Inflation is forecast to average 3.8% in 2025 and 4.2% in 2026, each 0.1 percentage point below earlier projections, reflecting lower assumed crude oil prices. Real GDP growth is forecast at 3.5% in 2025 and 3.9% in 2026, revised down 0.3 and 0.1 percentage points from April, reflecting a slowdown in primary industries—especially livestock restocking.