Standard Bank expects BoN to raise repo rate to 7%

**Staff Writer **

Standard Bank Namibia expects the Bank of Namibia (BoN) to raise the repo rate by 25 basis points to 7% on 28 October, following a similar increase by the South African Reserve Bank (SARB), as rising inflation and higher oil prices increase pressure on monetary policy.

In its monetary policy preview, prepared by group economist Helena Mboti, Standard Bank said global inflationary pressures, rising domestic prices, strong import growth and a widening trade imbalance support the case for further monetary tightening.

The expected increase would narrow the interest rate differential between Namibia and South Africa from 50 basis points to 25 basis points, following the SARB’s latest increase to 7.25%.

Standard Bank said international oil prices were trading at around US$110 per barrel, compared with levels below US$100 earlier in the year, raising concerns about imported inflation.

As a net importer, Namibia remains exposed to higher fuel, transport and other energy-related costs, which could push up consumer prices.

The bank also warned that second-round inflation effects could spread price increases across the economy.

The Bank of Namibia has revised its 2026 inflation forecast upwards by 0.4 percentage points to 4.0%, while annual inflation accelerated to 5.4% in September.

Standard Bank expects inflation to rise further, potentially approaching 6.0% before moderating.

Although average inflation for the year is still expected to remain above 4%, the bank said recent developments suggest that the risks remain tilted towards higher prices.

Global monetary policy has also become more restrictive. The United States Federal Reserve raised its federal funds rate by 25 basis points in September, while the SARB increased its policy rate by the same margin at its latest meeting.

Both central banks cited persistent inflationary pressures associated with escalating tensions in the Middle East, renewed conflict between Russia and Ukraine, and rising energy prices.

Standard Bank said uncertainty over the global inflation outlook has complicated the outlook for interest rates, with US markets anticipating rates remaining higher for longer, while South African markets expect gradual easing from early 2027 if inflation remains contained.

Namibia’s external position presents another risk. Data from the Namibia Statistics Agency show that imports increased by 12.9% year-on-year in the second quarter of 2026, while exports grew by only 0.3%.

The bank said the widening trade imbalance could be compounded by El Niño conditions and foot-and-mouth disease pressures in the second half of the year.

With imports growing faster than exports, pressure on foreign reserves could increase.

The Bank of Namibia has indicated that import cover remained between three and four months during 2026, only modestly above the Southern African Customs Union benchmark of three months.

Standard Bank said the reserve position requires continued monitoring as external vulnerabilities increase.

Domestically, second-quarter economic growth was revised upwards, although economic activity is expected to weaken in the second half of the year.

The bank said the central bank has maintained that its current monetary policy stance is sufficiently accommodative to support economic growth, leaving limited scope for further easing amid rising inflation and external risks.

The Bank of Namibia has also reiterated that price stability remains its primary objective and indicated its intention to narrow the interest rate differential with South Africa to support the currency peg and contain imported inflation.

Standard Bank expects interest rates to remain broadly unchanged through most of 2027, with possible easing in the second half of the year if inflation moderates as anticipated.

However, the bank cautioned that the outlook remains uncertain, with global inflation, oil prices and domestic economic conditions likely to influence future monetary policy decisions.