SUNBIZ

Monetary Policy Stance Remains Unchanged

Following its monthly meeting on January 25, 2018, the Reserve Bank of Fiji Board agreed to maintain the Overnight Policy Rate at 0.5 per cent. In conveying the deci­sion, the
26 Jan 2018 14:50
Monetary Policy Stance Remains Unchanged
RBF

Following its monthly meeting on January 25, 2018, the Reserve Bank of Fiji Board agreed to maintain the Overnight Policy Rate at 0.5 per cent.

In conveying the deci­sion, the Governor and chairman of the Board Ar­iff Ali stated that, “recent data confirm the strong growth momentum in 2017 for both the global and do­mestic economy.

Externally, the Interna­tional Monetary Fund ear­lier this month upgraded global growth to 3.7 per cent for last year on ac­count of stronger perfor­mances in both advanced and emerging market economies.

For 2018, the world econ­omy is now envisaged to expand by 3.9 per cent, propelled by the positive spillover of the US tax cuts on trading partner economies.

Nevertheless, downside risks in the form of higher inflationary pressures, build-up of financial vul­nerabilities and tighten­ing of global financing terms may potentially de­rail this year’s global out­look.”

Domestically, Mr Ali stat­ed that, “the Fijian econo­my is expected to achieve a broad-based growth of 3.6 percent this year un­derpinned by higher ag­gregate demand coupled with strong sectoral per­formances in tourism and anticipated higher manu­facturing and industrial activity.

“Several underperform­ing sectors such as gold and timber are also expect­ed to rebound this year.

“The Government’s expansionary policies should continue to sup­port consumer and inves­tor confidence.”

He also added that strong private sector credit growth predicated on the current low interest rate environment is also con­ducive to growth. On the downside, Mr Ali noted that adverse weather con­ditions and the somewhat subdued performance in the primary industries represent downside risks to the domestic economic outlook while the recent increase in global crude oil prices have trickled into higher domestic en­ergy costs.

Nevertheless, the twin monetary policy objectives of the Bank remain intact. Inflation was 2.8 per cent at end-2017, slightly higher than the forecast of 2.5 per cent.

Higher yaqona and to­bacco prices persisted throughout the year and are likely to continue in the months ahead.

While inflation in the near term is expected to be domestically driven, any sharp increase in oil and food prices as well as ad­verse weather conditions such as the recent flooding in the West could put fur­ther upward pressure on prices.

Foreign reserves remain at comfortable levels. As of yesterday, foreign re­serves stood at $2,194.2 million (sufficient to cover 5.0 months of retained imports of goods and non-factor services) and are expected to remain com­fortable throughout the year despite the risks from higher mineral fuel prices.

The Governor concluded that the Reserve Bank will continue to monitor in­ternational and domestic developments closely and align monetary policy ac­cordingly.

Source: Reserve Bank of Fiji

Feedback: maraia.vula@fijisun.com.fj

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