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Weekly Focus: CPI May 2015

Weekly Focus: CPI May 2015
June 20
08:49 2015

The Consumer Price Index (CPI) for the month of May, 2015 stood at 0.8 per cent.
It remained the same when compared to the previous month and 0.6 per cent when compared to the same period the previous year.
The All Items CPI on the other hand registered a decrease by 0.3 per cent over the previous month and stands at 107.7.
There are two measures of inflation used in Fiji. One compares the average CPI over the past twelve months with the average CPI over the previous twelve months.
The other compares the CPI in the current month with the CPI in the comparable month of the previous year.

CPI Indicator
The CPI is an important indicator as it identifies periods of inflation or deflation, large rises in CPI during a short period denotes inflation and large drops denotes deflation.
It is an important indicator to investors and most importantly to the Reserve Bank to maintain price stability by making decisions on monetary policy.
It indicates the average changes in the prices of goods and services purchased by households nationwide with monthly price collections carried out in the urban areas and the index is currently taken to represent price changes in rural areas as well.
CPI is the most common measure of inflation and a low inflation is beneficial to the economy as it is an important precondition for promoting sustainable economic growth.
Low inflation also preserves the buying power of money, therefore, protecting people’s savings.
According to the RBF Economic Focus March 2004 report, it states that Fiji continues to enjoy relatively low inflation.
This phenomenon is largely due to our fixed exchange rate regime, as over 60% of our inflation is caused by foreign factors such as import prices.
Regarding foreign exchange rates; the AUD and NZD remain favourable for importers. Whilst the USD could hurt imports and external USD denominated debt. But remains lucrative for Fiji exports in USD.

Final conditions
Financial conditions remained largely accommodative for economic activity in Fiji.
Broad money (M3) in April grew by an annual 10.0 percent from 9.0 percent in March, mainly underpinned by the growth in private sector credit (15.2% from 13.8%in March).
Interest rates remained generally low
With the commercial banks’ weighted outstanding lending rate falling to 5.70 percent in April (from 5.71%).
However, commercial banks ‘weighted average new lending and existing time deposit rates rose respectively from 5.66 percent to 5.93 percent and from 2.37 percent to 2.46 percent.
In summary inflation continues to test higher and is not expected to slow as private sector consumption borrowing remains buoyant.
Inflation continues to erode the value of money, thus are the savers getting true value? Tax free investments remain with increasing ones FNPF contributions or buying Unit Trust units.
This is an informative publication, sponsored by The Fiji Sun, Fiji Bureau of Statistics and HFC Bank. All views expressed or implied are purely of the Treasurer at HFC Bank, Peter Fuata.



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