Namibia Lifts Key Policy Rate to 4.75%

The Bank of Namibia raised its key repo rate by 25 bps to 6.75% during its May 2026 meeting, after keeping it unchanged for three consecutive meetings at 6.50%. The policy stance was deemed appropriate to mitigate inflationary risks from the energy shock and safeguard the currency peg between the Namibian dollar and the South African rand. The MPC noted rising global and domestic inflationary pressures in the near term, despite the US-Iran peace agreement, alongside subdued domestic economic activity and sluggish private sector credit growth. The annual inflation rate in Namibia rose for the second month to 4.1% in May, up from 3.1% in April and marking the highest since March 2025. The inflation outlook has been revised up to 4.0% in 2026 (vs 3.7%) and 3.6% in 2027 (vs 3.4%), on higher oil prices assumptions and upside risks from administered prices, currency volatility, and potential re-escalation of Middle East tensions. Growth projections for this year were kept at 2.6%.

The Bank of Namibia left its benchmark repo rate unchanged at 6.5% during its April 2026 meeting, marking the third consecutive hold, in a bid to preserve the Namibian Dollar’s peg to the South African Rand while supporting the domestic economy. Policymakers noted that while inflation remained contained during the first quarter, risks to the outlook are skewed to the upside, driven by administered price pressures, exchange rate volatility, and spillovers from the prolonged Middle East conflict. The annual inflation rate eased to 2.1% in March, the lowest since July 2020, from 2.4% in the prior month, marking a fifth consecutive month of slowdown. Looking ahead, inflation is projected to rise notably in Q2 2026, averaging 3.7% for the year versus a 3.5% estimate in February, before gradually moderating to 3.4% in 2027. Meanwhile, domestic activity remained subdued. Real growth is expected at 2.6% in 2026 and 2.9% in 2027, both below December's estimates of 3.8% and 4.3%, respectively.

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.