WINDHOEK, Oct 28 – The Bank of Namibia raised its benchmark interest rate by 25 basis points to 7% on Wednesday, responding to rising fuel prices and seeking to preserve the stability of the country’s currency arrangement with South Africa.
The central bank increased its repo rate from 6.75% to 7%, aiming to limit the risk that higher fuel costs would feed into broader prices across the economy.
The decision comes as inflationary pressures intensify in the southern African country. Annual consumer price inflation accelerated to 5.4% in September, its highest level since January 2024.
Fuel prices raise inflation concerns
The central bank’s decision reflects concerns that higher fuel prices could generate second-round inflationary effects, in which increased transport and production costs spread to other goods and services.
Fuel price increases can raise operating expenses for businesses and distribution costs across supply chains. If these pressures persist, they can contribute to broader price increases and weaken household purchasing power.
By raising its policy rate, the Bank of Namibia is seeking to contain these inflationary pressures and limit the risk of more persistent price growth.
Currency peg remains a policy priority
The rate increase also aims to safeguard Namibia’s currency peg with the South African rand, a central feature of the country’s monetary framework.
The arrangement links Namibia’s currency stability closely to developments in South Africa’s economy and financial markets. Maintaining the peg remains an important consideration in the central bank’s interest-rate decisions.
The latest increase therefore reflects two policy priorities: limiting the transmission of higher fuel prices into domestic inflation and preserving the stability of the currency arrangement.
With inflation reaching a level not seen since January 2024, the central bank faces the challenge of containing price pressures while managing the effects of tighter monetary policy on borrowing costs, credit demand and economic activity.
