Press Release No. : 21/2021
Date : 25 November 2021
At its meeting today, the Reserve Bank of Fiji Board agreed to keep the Overnight Policy Rate
unchanged at 0.25 percent.
In announcing the decision, the Governor and Chairman of the Board, Mr Ariff Ali, highlighted that the bounce-back in domestic economic activity is underway, although it remains below pre-pandemic levels. The economic upturn is largely aided by the achievement of the target vaccination rates leading to the relaxation of COVID-19 protocols and ensuing rebound in mobility, alongside monetary and fiscal policy support. The latest sectoral data revealed improved production for sawn timber, mineral water, and electricity over the month to October.
Likewise, domestic demand is gradually firming up as shown by the positive movements in certain partial indicators of consumption and investment in October. Hiring intentions as per the RBF Job Advertisements Survey are also showing signs of recovery, evident by the monthly increase in the number of vacancies advertised since July this year.
Similarly, in the financial sector, the decline in outstanding private sector credit slowed further as commercial banks new loans cumulative to October grew compared with the same period last year. Moreover, liquidity remains ample at $1,747.2 million (24/11), which continues to put downward pressure on interest rates. Looking ahead, demand for credit is anticipated to pick up as economic activity gains momentum, with the quantitative easing measures and low interest rate environment also providing additional support.
Mr Ali emphasised that the resumption of international travel and tourism to Fiji is expected to fuel a stronger economic recovery next year but is subject to downside risks. These include the possibility of a third wave of COVID-19, adverse weather events, rising international oil and food prices and tightening of global financial conditions. Moreover, the wait-and-see approach taken in anticipation of the 2022 National Election is also likely to influence investor sentiments moving forward.
In addition, the monetary policy objectives of the Bank were assessed to be intact for the near to medium term. Inflation over the next 12 months is expected to edge-up, driven by higher fuel, food and yaqona prices. Foreign reserves are currently adequate at $3,055.4 million (25/11), sufficient to cover 10.6 months of retained imports, and projected to remain comfortable in the foreseeable future.
In closing, the Governor reiterated that the Bank will remain vigilant in its macroeconomic assessment given the evolving global and domestic conditions, and align monetary policy accordingly.