Press Release No. : 06/2021
Date : 25 March 2021
At its monthly meeting on 25 March, the Reserve Bank of Fiji (RBF) Board agreed to keep the Overnight Policy Rate at 0.25 percent.
In announcing the decision, the Governor and Chairman of the Board, Mr Ariff Ali, highlighted that “the accommodative monetary policy stance remains appropriate given the subdued domestic economic activity and output remaining well below potential.”
Sectoral performances and aggregate demand remain weak amidst the significant uncertainty and financial constraints faced by firms and households. Reflecting the sluggish economy and elevated credit risks, domestic credit decelerated in February largely on account of lower lending to the private sector. Liquidity levels (24/03) in the banking system are currently at $953.3 million and forecast to remain ample in the coming months.
The recent vaccine rollout to front line workers nearly a year after Fiji’s first coronavirus case is a positive development for the nation. Similarly, prospects for business conditions, investment, retail sales and employment reflected in the Reserve Bank’s December 2020 Retail Sales and Business Expectations Surveys, point to some optimism over the next twelve months. The extension of COVID-19 customer relief measures on a case-by-case basis to 30 September by the Association of Banks in Fiji will provide much-needed support to impacted households and businesses and reinforce positive expectations moving forward.
With regard to the twin monetary policy objectives of the Bank, Mr Ali stated that “the outlook for inflation and foreign reserves is stable. Annual inflation turned positive (1.1%) in February after declining for more than a year, largely influenced by higher prices for local fruit and vegetables due to the impact of Tropical Cyclone Ana and the associated floods. Inflationary pressures are expected to remain contained in the near term in the absence of any major supply-side shock. Foreign reserves are currently (25/03) at $2,217.5 million, sufficient to cover 6.8 months of retained imports and are projected to rise further in the coming months due to drawdown of external loans.”
Taking into account these latest economic developments and the stable outlook for inflation and foreign reserves, the Board concluded that the monetary policy stance is appropriate. The Bank will continue to monitor the economic situation and risks closely and align monetary policy as warranted.