(Bloomberg) -- Namibia’s central bank reduced its key interest rate for a second time in a row after revising its inflation forecasts lower and to support economic growth.
The monetary policy committee lowered the key rate by 25 basis points to 7.25%, Governor Johannes !Gawaxab told reporters in Windhoek, the capital, on Wednesday. The size of the reduction was in line with South Africa’s cut last month.
“To continue supporting the domestic economy while simultaneously safeguarding the peg between the Namibia Dollar and the South African rand, the MPC unanimously decided to cut the repo rate,” he said. “In deciding on this policy stance, the committee was wary of the renewed widening of the policy rate differential with the anchor country, South Africa, but was comforted by Namibia’s recent experience of orderly capital flows.”
The arid southwest African nation’s currency is pegged to the rand, which means monetary policy often follows the South African Reserve Bank’s actions. Its policy has diverged when the two nation’s inflation or economic growth paths differ, such as in August. Namibia’s rate has been lower than South Africa’s since November 2022 and differs by 75 basis points.
Inflation eased to a more than three-year low in September to 3.4% from 4.4% a month earlier, and the central bank adjusted its outlook to reflect this performance.
“The medium-term inflation forecast has been revised downward to 4.3% in 2024 and 4% in 2025, compared to 4.7% and 4.4%, respectively, at the previous MPC meeting,” the governor said. “The revised forecast is due to a more favorable outlook for international crude oil prices and a stronger exchange rate.”
(Updates with comments from governor from third paragraph.)
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