Namibia Leaves Key Policy Rate Steady at 6.75%

The Bank of Namibia kept its benchmark repo rate unchanged at 6.75% during its August 2026 meeting, following a 25 bps rate hike in June. Policymakers said the stance remained appropriate to support international reserves and maintain the Namibian dollar’s one-to-one peg with the South African rand. The MPC noted increased domestic inflationary pressures and weaker economic activity since its previous meeting. Annual headline inflation rose to 4.4% in June from 4.1% in May, driven mainly by higher transport prices. Inflation is forecast at 4.0% in 2026 before easing to 3.9% in 2027, with the latter revised up by 0.3 percentage point amid Middle East tensions. Economic activity slowed in H1 2026, with weakness in mining, manufacturing, power generation and transport offset by gains in agriculture and retail. Growth is now forecast at 2.1%, down from 2.6%, with slower global growth, foot-and-mouth disease and a potential El Niño posing downside risks.

The Bank of Namibia raised its key repo rate by 25 bps to 6.75% during its June 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.