Central bank rejects forward guidance on rates

The Bank of Namibia has opted against providing forward guidance on future interest-rate decisions, despite this year’s Nobel Prize in economics highlighting how it could help individuals and businesses plan better. This follows the central bank’s announcement last week of a 25-basis-point increase in the repo rate. The position comes as the 2026 Nobel Prize in Economic Sciences has renewed attention on how central banks can influence economic activity not only through interest-rate decisions, but also through what they communicate about future policy. The Nobel Prize, awarded on 12 October to economists Robert Hall and Michael Woodford, recognised research on how monetary and fiscal policy can help stabilise economies, including the importance of expectations in shaping the decisions of households and businesses.

One of the approaches central banks can use to influence these expectations is forward guidance, where the central bank can communicate their likely future interest-rate direction to help households, investors and businesses plan ahead. However, Bank of Namibia governor Ebson Uanguta says the central bank was not considering this approach. He says Namibia’s changing economic environment made it difficult for the central bank to commit to a future policy direction. “We are data-driven. So if I guide you in that manner and then come December the data has changed, I’m going to lose credibility because I have lied and I should not lie. I should be informed by data,” he says. This is despite the fact that in economics, almost all things are projections as nothing ever remains the same. The Nobel research found that central bank communication can help all players in the economy make informed decisions. Forward guidance does not necessarily require a central bank to…