Fiji’s central bank left its Overnight Policy Rate (OPR) unchanged at 0.50 percent and said “the positive outlook for inflation, foreign reserves and growth lends support to the continuation of an accommodative monetary policy stance.”
The Reserve Bank of Fiji (RBF), which has maintained its rate since October 2011, added its monetary policy objectives remain intact, with foreign reserves hitting new records and inflation subsiding following the temporary acceleration in the wake of Tropical Cyclone Winston.
Fiji’s economy was hit hard last year by Winston – the worst ever cyclone in the Southern Hemisphere – along with other adverse weather, with growth slowing to 2.0 percent from 3.6 percent in 2015 and inflation rising above 4 percent most of the year as supply of some food items was affected.
But headline inflation was steady at 2.0 percent in July and June, and core inflation at 1.7 percent, said Acting RBF Governor Ariff Ali.
Fiji’s foreign reserves had risen further to a new record of $2.349 billion, up from $2.307 billion on July 20, due to strong tourism and capital inflows.
Economic activity remains firm due to expanding demand in improvements in the sugar and tourism industries, with total investment forecast to improve to around 26 percent of Gross Domestic Product the year from public and private sector projects and recovery activity related to Winston.
In is June quarterly review, RBF projected year-end inflation of 3.0 percent and economic growth this year of 3.8 percent.
The Reserve Bank of Fiji issued the following statement:
In announcing the decision, the Acting Governor Mr Ariff Ali highlighted that the Reserve Bank’s monetary policy objectives remain intact. He explained that, “the temporary upswing in inflation due to supply constraints following Tropical Cyclone (TC) Winston and other adverse weather conditions last year has subsided. Headline inflation was 2.0 percent for the second month in July while core inflation, excluding volatile items was lower at 1.7 percent. On foreign reserves, current levels have outperformed expectations and continue to reach new records, boosted by tourism and other capital inflows and currently are $2,349 million, sufficient to cover 5.8 months of retained imports.”
Mr Ali added that “domestic economic activity remains firm on the back of expanding aggregate demand and better performances in the sugar and tourism industries. Total investment is forecast to improve significantly to around 26.0 percent of Gross Domestic Product this year led by a combination of new and on-going public and private sector projects as well as TC Winston rehabilitation related activity, which should continue to support job creation.”
He clarified that the central bank has kept the high level of banking system liquidity to support credit demand as there are no threats to its objectives in the near term.
Looking ahead, the Acting Governor concluded that the positive outlook for inflation, foreign reserves and growth lends support to the continuation of an accommodative monetary policy stance. Nevertheless, the Reserve Bank will continue to monitor domestic and international developments closely and align monetary policy as needed. “