Keeping repo rate unchanged a positive sign: analyst

Martin Endjala

Economic analyst Joseph Sheehama has praised the Bank of Namibia for keeping the repo rate unchanged, saying it will benefit those with bank loans, especially home mortgages.

In an interview with Windhoek Observer last week, Sheehama said, that the Bank of Namibia’s decision to keep the repo rate unchanged at 7.75 per cent was unexpected, but maintaining the status quo is a positive sign and will provide moderately needed support to the homeowners, especially those with mortgage loans.

A further reduction in interest rates would have been the preferred course of action to bolster overall market confidence, and the credit extension will remain moderate because the repo rate did not ease the monthly obligations such as instalments.

“Installments remain the same, whilst the end user will adopt a strategy of wait-and-see strategy as a decision to maintain an unchanged repo rate will not ease business commitments. Maintaining the status quo is especially critical during periods of economic uncertainty as an increase in the interest rate would have adversely affected housing demand and derailed momentum.

Notwithstanding the current level of inflation, it is probable that there will be a downward trend in the future. I expect a continuation of existing policy rates throughout 2023 and hope that the Bank of Namibia will continue to take positive steps to capitalize on the renewed growth of the sector and make it more enticing for the people,” he said.

He added that the overall, decision to keep the repo rate unchanged is a positive development for Namibians and investors, as it provides them with some stability and predictability regarding interest rates on loans. However, if inflation remains at 4.5 percent or drops, the Bank of Namibia may need to reduce the repo rate in the future, which could lead to lower interest rates on home loans.

“The stock of international reserves stood at N$ 54.2 billion compared to N$ 53.0 billion recorded at the end of June 2023 and N$ 49.7 billion which warrantee a slash of 25 BPS, thought. I remain positive on equity markets and expect interest rate sensitive sectors like real estate, motor dealers, banks, financials along with capital goods to lead the rally in the near-to-medium term,” he explained.

Sheehama further highlighted that it’s essential to note that many other factors also affect the market, such as demand, supply and economic conditions. Which is a step in the right direction in terms of helping ease pressures on Namibians. This would ensure a better assessment of the market forces that drive the high cost of living and the extent to which these forces offset or reinforce the monetary policy stance going forward.

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