Namibia's central bank raised its main interest rate for the first time in three years on Wednesday and revised its inflation forecasts upwards because of higher oil prices.

The Bank of Namibia raised its repo rate by 25 basis points to 6.75%.

"The Monetary Policy Committee noted rising global and domestic inflationary pressures over the near term, despite the ensuing peace agreement between the United States and Iran," the central bank said in a statement.

It said a moderate tightening of policy was warranted given subdued domestic economic activity and sluggish credit extension.

Higher inflation

Inflation quickened to 4.1% year on year in May from 3.1% in April.

The uptick came despite the Southern African country's government cutting fuel levies to cushion the impact of the global energy price surge triggered by the US-Israeli war against Iran.

The central bank now expects inflation to average 4.0% in 2026, higher than the 3.7% forecast given at its April policy meeting.

Namibia's monetary policy is typically closely aligned with that of neighbouring South Africa and its currency pegged one-to-one with the rand. The South African Reserve Bank also raised its main lending rate by 25 basis points last month.