Press Release No. : 10/2024
Date : 30 May 2024
Press Release No 10 – RBF Maintains Monetary Policy Stance
The Reserve Bank of Fiji (RBF) Board held the Overnight Policy Rate (OPR) at 0.25 percent at its meeting on 30 May. The decision to maintain the OPR comes as partial indicators suggest a slowdown in domestic economic activity alongside some constraints and risks affecting the growth outlook.
Domestically, the labour market remains constrained amid the continued outflow of skilled and experienced labour due to high emigration. With the tight labour market, wages paid have increased notably but are uneven across sectors. Visitor arrivals a crucial component of domestic economic activity, continued to register annual increases in the year to April (7.7% to 271,683 visitors). However visitor arrivals from Australia Fiji’s largest source market have been lower in most months of 2024 compared to last year. Nonetheless increased arrivals from other markets (New Zealand, China, United States, Japan and Europe) compensate for this loss.
Consumption spending remains positive yet cost-of-living pressures and high emigration are stalling its momentum. The RBF’s February Retail Sales Survey also indicates a deceleration in consumption spending this year. While pipeline investments look encouraging, current private sector investments remain below potential due to a number of challenges, including the availability of labour. Similarly, resource-based sectors (except gold production) continued to underperform due to challenges specific to each industry.
The financial sector remains stable, with credit to the private sector expanding by 9.1 percent in April, supported by adequate liquidity at $1,943.2 million (as of 29 May) and low interest rates.
Foreign reserves remain comfortable at $3,191.8 million as of 30 May sufficient to cover 5.1 months of retained imports of goods and services. The level of foreign reserves is projected to remain adequate over the medium term. The annual inflation rate rose to 7.1 percent in April, the highest observed in the past ten years. The outturn in the inflation rate reflects the higher prices for food, as well as alcoholic beverages, narcotics, and tobacco, reflecting a surge in the prices of agricultural produce impacted by weather conditions and the pass-through of tax increases. While the outlook for inflation is to moderate once the full impact of the VAT increase tapers off in August the RBF will closely monitor the effect of wage demand on inflation.
Global economic uncertainty persists, with several downside risks, including heightened geopolitical tensions, rising commodity prices and uneven growth amongst major trading partners. Similarly, domestic risks are tilted to the downside with the potential for further disruptions to economic activity due to external shocks, adverse weather conditions, and domestic structural and capacity constraints.
In light of these economic factors, the RBF Board agreed to maintain the current monetary policy stance to support domestic activity. The RBF will continue to closely monitor developments and risks to the outlook and align monetary policy accordingly.
RESERVE BANK OF FIJI
For further details, please contact:-
Communications Office
Telephone: (679) 3223 381 Email: info@rbf.gov.fj
Mr Mervin Singh – Manager Corporate Communications
Telephone: (679) 3223 229 Email: mervin@rbf.gov.fj