Namibia raises lending rate by 50 basis points, seeks to support economy

11/30/2022 | 05:31am

WINDHOEK (Reuters) -Namibia's central bank raised its main lending rate by 50 basis points on Wednesday to 6.75%, tightening policy to help fight inflation but holding off from a larger hike to support economic growth.

"The decision was taken to contain inflationary pressure and its second-round effect, and anchor inflation expectations while being mindful of the need to support the economy," the bank said in a statement.

Namibia's annual inflation of 7.1% last month was the same as September's level.

The central bank is in the process of revising up its 2022 growth forecast from a previous prediction of 3.2%, and Governor Johannes !Gawaxab told a news conference he would not be surprised if growth reached 4%.

As well as price stability the Bank of Namibia tries to safeguard the 1:1 link between the Namibian dollar and the South African rand.

Last week, neighbouring South Africa raised rates by 75 basis points to 7.00% after inflation unexpectedly inched up.

!Gawaxab told Reuters a smaller rate increase than South Africa's was justified as the Namibian economy needed support and the bank was not seeing capital outflows based on the differential between South African and Namibian interest rates.

"If you go with 75 basis points you constrain the little green shoots (of economic recovery) that we are seeing," the governor said.

(Reporting by Nyasha Nyaungwa; Writing by Alexander Winning;Editing by Estelle Shirbon and Clarence Fernandez)

By Nyasha Nyaungwa

Reuters 2023
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