The Reserve Bank of Fiji (RBF) has kept its overnight policy rate unchanged, with Governor and Board Chairman Ariff Ali saying the central bank must carefully balance rising domestic prices, maintaining adequate foreign reserves and supporting economic growth.
Mr Ali said inflationary pressures are expected to remain elevated in the near term despite a recent easing in global oil prices, which fell to US$74 per barrel on June 23 from US$92 per barrel at the end of May following reports of a tentative, time-bound agreement between Iran and the United States.
He explained that domestic inflation continues to reflect the delayed impact of earlier increases in fuel and other imported input costs, the time needed for global oil supplies to stabilise, and Fiji’s fuel pricing system, which adjusts based on earlier, higher import costs.
The latest Fiji Bureau of Statistics figures show headline inflation reached 3.9 per cent over the past year, driven largely by higher prices for fuel, food and kava.
Mr Ali said inflation is still projected to rise to around 6.0 per cent by the end of the year, although the outlook remains dependent on whether the Iran-US peace agreement holds, geopolitical tensions ease and global oil markets return to normal production levels.
Despite the inflation outlook, Mr Ali said Fiji’s financial system remains resilient, supported by $1.6 billion in liquidity as of June 24 and continued growth in private sector lending.
“The financial system is well positioned to withstand temporary global and domestic shocks,” he said.
Mr Ali said slowing economic activity combined with inflation driven mainly by imported goods supported the decision to leave the overnight policy rate unchanged.
He said increasing borrowing costs at a time when economic growth is slowing would place unnecessary pressure on businesses and households, making it appropriate for the Reserve Bank to maintain its current monetary policy settings.
