Press Release No. : 18/2021
Date : 30 September 2021
The Reserve Bank of Fiji Board maintained the Overnight Policy Rate at 0.25 percent following its monthly meeting on 30 September 2021.
In announcing its decision, the Governor and Chairman of the Board, Mr Ariff Ali, explained that the global economic recovery continues, albeit at an uneven pace. Several central banks, especially in advanced economies, have indicated their intentions to taper their quantitative easing program due to inflationary concerns. Supply chain disruptions, rising shipping costs coupled with higher global energy and food prices have stoked inflationary concerns, prompting a reassessment of their accommodative stance. In emerging and developing countries, a sustained recovery continues to be elusive, reflecting slow progress in vaccination, tightening financial conditions and pandemic-related disruptions to economic activity.
Domestically, the recent opening of borders within Viti Levu and the planned resumption of international travel later this year should augur well for the Fijian economy in the last quarter of 2021. Latest sectoral data reveal better annual performances for the resource-based sectors, particularly timber, gold, and mineral water production, while COVID-19 related disruptions continue to impact both the services and industrial sectors. While partial indicators for consumption and investment remained generally weak over the month, some improvements are envisaged moving ahead as COVID-19 induced restrictions are relaxed and businesses reopen.
Financial conditions remain accommodative, with liquidity levels (29/09) at $1,629.6 million. The comfortable level of foreign reserves coupled with the quantitative easing measures of the RBF including through the Disaster Rehabilitation and Containment Facility, will ensure that liquidity remains ample and supportive of a low-interest rate environment in the near term. Commercial banks’ lending rates and cost of funds have broadly declined since the beginning of the year.
On the monetary policy objectives, inflation turned positive in August, mainly underpinned by higher prices for food and fuel. Food prices rose by 6.9 percent, while the upswing in global energy prices underlined the 36.5 percent average growth in domestic fuel prices compared to the same period last year. Consequently, year-end inflation is forecast to increase to 2.0 percent after hovering in negative territory for most of the last twenty months. Foreign reserves remain at comfortable levels at around $3,183.5 million (30/09), sufficient to cover 11.0 months of retained imports.
Governor Ali concluded that the RBF will continue to monitor global and domestic economic developments and align monetary policy as and when required.