The Reserve Bank of Fiji (RBF) board has kept official interest rates at 0.25 per cent for the fifth year running as investment activity remained subdued in the local economy.

RBF Governor and board chairman Ariff Ali said the Fijian economy has been largely driven by consumption activity supported by the higher tourist demand, personal remittances and improved disposable incomes resulting from current tight labour market conditions.

Investment however had yet to take the bait of the low rates despite RBF’s accommodative stance. It has kept its Overnight Policy Rate at 0.25 per cent and unchanged since March 2020 but hope the new budget will speed things up.

“Investment activity is slow paced but recent forward-looking indicators point to a gradual improvement.

“Going forward, the initiatives announced in the fiscal year 2024-25 National Budget is expected to stimulate economic activity.”

Mr Ali said the financial sector remained conducive for growth with the low interest rates supporting private sector credit growth which accelerated to 11.3 percent in June, the highest since July 2017 (15.6 per cent). Performance of some major sectors were mixed.

Tourism maintained its growth momentum leading to a total of 447,155 visitor arrivals during the first six months of this year, a seven per cent increase compared to last year. The growth was driven by more visitors from New Zealand, the United States, China, Australia and the Pacific Island Countries.

Gold and electricity output also increased while timber and mineral water production remain muted in the year to June, RBF stated.

On RBF’s monetary policy objectives, the central bank is expecting inflation, which picked up from 5.8 per cent in May to 6.7 per cent in June —  to moderate from next month and to remain at between four and five per cent at the end of the year, while foreign reserves at $3.5billion on July 25, remained sufficient to cover 5.8 months of retained import of goods and services.

Mr Ali said after weighing in current economic conditions and risks, the medium-term outlook for inflation and foreign reserves was stable.