Jo-Maré Duddy
22 June 2011
Bank of Namibia (BoN) Governor Iipumbu Shiimi is likely to hold the repo rate at six per cent this morning, leaving the prime interest rate unchanged at 9,75 per cent.
John Steytler, group economist of Capricorn Investment Holdings (CIH), said although spiralling inflation is bound to raise the BoN’s eyebrows, it is unlikely that Shiimi will start tightening the monetary screws today.
“Given current reserve levels and recent weaknesses in the global and domestic economy there is still scope to keep monetary policy neutral until at least the fourth quarter of this year and possibly the first quarter of next year,” Steytler said.
Namibia’s annual inflation in May came in at 5,2 per cent, up from 4,8 per cent the previous month.
Money supply, that is currency in the hands of the public as well as transferable and other deposits in national currency, moderately accelerated to 1,5 per cent during April from 1,3 per cent during March and 12,8 per cent in April last year.
“While there is theoretically a positive relationship between growth in money supply and inflation, we believe that recent price pressures in Namibia have been driven mainly by higher food and fuel prices and this is likely to continue in the months ahead,” Steytler said.
Food inflation in May jumped from 4,4 per cent in April to 5,9 per cent. A year ago, food inflation stood at 2,5 per cent.
Steytler believes the BoN “will pay a closer watch over escalating price pressures and may, if necessary, attune policy accordingly at its next meetings”.
Today, however, Steytler is convinced the repo will remain where it has been since September last year.
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