Namibia Leaves Policy Rate Unchanged at 6.5%

The Bank of Namibia kept its benchmark repo rate unchanged at 6.5% in February 2026, as in December, as it sought to safeguard the Namibian dollar’s peg to the South African rand and support domestic growth. The MPC pointed out that the sustained exchange rate appreciation has played a key role in curbing inflation, which remains well contained. In 2025, average inflation fell to a post-pandemic low of 3.5%, down from 4.2% the previous year, coming in slightly below the central bank's earlier forecast of 3.6%. Inflation continued to ease for the third month to 2.9% in January 2026, the lowest level since February 2021. Reflecting this trend, the 2026 forecast has been revised down to 3.5%, with 2027 expected at 3.4%. Meanwhile, policymakers highlighted that economic activity slowed in the first three quarters of 2025, led by agriculture, fishing, mining, and manufacturing, with high-frequency indicators pointing to subdued growth in 2025.

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.