The Reserve Bank of Fiji (RBF) expects headline inflation to gradually rise through 2026 as the temporary effects of VAT reductions and bus fare subsidies unwind, with inflation projected to settle between 2.5 and 3.0 per cent by the end of the year, assuming no major economic shocks.
This outlook was outlined after the RBF Board decided to keep the Overnight Policy Rate unchanged at 0.25 per cent following its meeting yesterday.
RBF Governor and Board Chairman Ariff Ali said current monetary conditions remain appropriate, noting that while inflation is currently low, it is expected to normalise over time.
“Headline inflation is expected to gradually increase over the course of 2026 as base effects from the lower VAT rate and the bus fare subsidy continue to unwind,” Mr Ali said, adding that the Bank’s core objectives of price stability and adequate foreign reserves remain intact.
Data released by the Fiji Bureau of Statistics shows that annual headline inflation stood at minus 2.5 per cent in January 2026, down from 2.5 per cent recorded in the same month last year.
The decline was largely attributed to policy-driven price adjustments, particularly the VAT reduction and lower fuel and gas prices.
Core inflation, which excludes volatile items such as food and fuel, was estimated at 0.8 per cent in January, broadly unchanged from a year earlier.
The RBF said this indicates underlying price pressures remain contained.
Looking ahead, the central bank expects inflation to return to positive territory as temporary measures phase out, while foreign reserves — currently around $3.6 billion — remain sufficient to support economic stability.
Mr Ali cautioned, however, that risks remain, including potential rises in global commodity prices due to geopolitical tensions and the ongoing cyclone season, which could affect both inflation and economic growth.
He said the RBF will continue to closely monitor developments and adjust monetary policy if necessary to safeguard stability.
