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Suggestion To RBF: Tighten Monetary Policy

An economist has indicated that looking ahead, the Reserve Bank of Fiji may need to pre-emptively tighten its monetary policy. ANZ Asia-Pacific Economist, Daniel Wilson, said this would be in
30 Apr 2015 11:22
Suggestion To RBF: Tighten Monetary Policy

An economist has indicated that looking ahead, the Reserve Bank of Fiji may need to pre-emptively tighten its monetary policy.

ANZ Asia-Pacific Economist, Daniel Wilson, said this would be in order to moderate demand pressure and credit growth.

“These views are largely based on the lending side where we are seeing growth figures quite strong over the past few years,” he said during a press conference in Suva yesterday.

Mr Wilson said the credit growth in 2014 in Fiji was 25 per cent which was quite strong where credit growth in the private sector was even stronger.

He said if a central bank starts to tighten monetary policy, it increases the cost of money which makes it difficult for people to spend their money and more savings.

“If RBF begins to increase interest rates which has been low and declining for a number of years which would then make the opportunity cost of spending money a little bit more difficult,” he said.

“It would therefore probably slow down the fast credit growth in the private sector.”

 

RBF Reaction

The Reserve Bank of Fiji has been accommodative for some time now as far as its monetary policy stance is concerned.

It has maintained the Overnight Policy Rate at 0.5 per cent for a few years now.

Governor Barry Whiteside stated they reason they have maintained this is because they want to encourage growth.

“On a monthly basis, the RBF board reviews our stance,” he said.

“So in terms of keeping monetary policy accommodative, that is what we are doing for now – but we review it very closely.

“But if we do see pressure in terms of our reserves or inflation, we will look at reviewing the amount.”

Mr Whiteside said with the current monetary policy stance, they have brought interest rates down and there has been a lot of demand for credit in the economy.

“Bank lending has gone up as high as 25 per cent. There will be pressure coming through because more people borrow,” he said.

Feedback: rachnal@fijisun.com.fj

 

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