As the nation’s central bank, the Reserve Bank of Fiji (RBF) is responsible for formulating and implementing monetary policy to achieve its dual objectives. In an earlier article, we explained that the twin monetary policy objectives of the RBF are ensuring price stability (i.e. keeping inflation at around 3.0 percent) and maintaining adequate levels of foreign reserves (i.e. sufficient to cover a minimum of 4 months of retained imports of goods and non-factor services).
The implementation of monetary policy involves maintaining an appropriate level of liquidity that is conducive to meeting the central bank’s monetary policy objectives. One way to do this is to make changes to the level of interest rates, which can be regarded as the cost of money.