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Warning that inflation, which surged from 9.7 per cent in May this year to 11.9 per cent in July could still go up, Bank of Namibia governor Tom Alweendo said Thursday that volatility in international prices of crude had tappered off, a welcome relief to external inflation pressures.
Alweendo said that the decline in prices of oil from US$ 148 per barrel in July to around US$ 113 per barrel currently, should provide relief to inflationary pressures.
“Moreover, there have been welcome reductions in certain food commodity prices such as dairy products, cereals and sugar,” he said.
The bank also said that food prices might have reached their peak in March this year.
According to him, previous monetary policy interventions have cooled down price pressures on the domestic market.
Growth in other domestic demand indicators such as credit extension to the private sector and motor vehicle sales remain subdued, the bank chief said.
He said that inflation should start coming down mid next year but warned that in the medium term, inflation could remain at two-digit levels.
“Figures (inflation) might have reached their peak or about to peak and some time next year, we might see figures coming down,” he said.
Defending the bank's decision in maintaining its key lending rate at 10.5 percent, he said that a strong international foreign currency reserves gives the economy a clean bill of health and strengthen the capacity of the bank to be able to defend its currency peg.
Alweendo said that the bank was confident about the currency peg as a nominal anchor to ensure long term price stability.
The central bank in December last year deviated from its usual policy of tracking decisions taken by the central bank in neighbouring South Africa by keeping its lending rate unchanged.
South Africa's central bank, which increased its benchmark rate by half a point to 12 per cent in June determines the direction of monetary policy in the common monetary union which also includes Lesotho and Swaziland.
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