What is the OPR?
The OPR is the key interest rate used by the Reserve Bank of Fiji (RBF) to officially indicate and communicate its monetary policy stance. A reduction in the OPR signifies an easing of monetary policy while an increase in the OPR signals a tightening of monetary policy. Basically, when the RBF changes the OPR, it is signalling to commercial banks and other financial system players the general direction in which the central bank desires the short- term interest rates to move. The general intention and expectation is that changes in the OPR will feed through to commercial banks’ short-term interest rates and to all the other relevant interest rates in the economy.
What causes the OPR to move?
In an earlier article, the RBF had explained that it had two objectives of monetary policy; the first is to ensure price stability or maintain the inflation rate at around 3 percent and second, to ensure Fiji has sufficient foreign reserves to cover a minimum of 4 months of retained import payments. Therefore, any movement in the OPR will depend on the assessment of the impact of economic developments on the outlook for our twin monetary policy objectives.