Press Release No 20 – RBF Maintains Accommodative Monetary Policy Stance
Press Release No. : 20/2020
Date : 27 August 2020
The Reserve Bank of Fiji Board at its meeting on 27 August kept the Overnight Policy Rate unchanged at 0.25 percent.
In announcing the decision, the Governor and Chairman of the Board, Mr Ariff Ali stated that “the COVID-19 pandemic continues to soar across the globe. The resurgence of infections in Australia and New Zealand will now further delay the resumption of international travel to Fiji and defer the return to some form of normalcy of tourism, our largest industry. On a positive note, there has been some progress in finding a vaccine with eight vaccines currently in large scale testing while two vaccines have been approved by local authorities for limited use in China and Russia. Domestically, partial indicators for consumption and investment remain well below those recorded a year ago and are in line with the forecast for the sharpest economic contraction on record. However, recent sectoral data shows some improvements over the month.”
Governor Ali added that the financial sector remains stable for now and banking system liquidity reached a record high of $992.6 million on 17 August, boosted by the Government’s drawdown of an external loan. To ensure businesses affected by the pandemic continue to have access to cheaper credit, the Disaster Rehabilitation and Containment Facility has been increased further by $50 million to $150 million.
Consumer prices continue to fall as the inflation rate was -1.6 percent in July. Deflation is expected to continue in the months ahead and year-end inflation is expected at -3.0 percent, given the subdued domestic demand and the reduction of taxes and duties on a number of products announced in the 2020-21 National Budget. Projected lower prices for alcohol, yaqona, food, fuel and transport underpin the negative inflation outlook for the end of the year. Foreign reserves (RBF holdings) remain at comfortable levels and are currently around $2,283.6 million (27/08), sufficient to cover 8.3 months of retained imports of goods and services and are anticipated to be adequate over the medium term.
The outlook for Reserve Bank’s twin monetary policy objectives of low inflation and comfortable level of foreign reserves remain intact. However, the persistence of the pandemic and the associated delay in the resumption of international travel is a significant downside risk to the outlook. The Reserve Bank will continue to closely monitor economic developments and risks and align monetary policy where appropriate.