Domestic economy to drive inflation to 2.5% this year
The Reserve Bank of Fiji left its benchmark Overnight Policy Rate (OPR) steady at 0.5 percent, a decision the bank said was “necessary to encourage investment and further strengthen growth in the economy.”
Maintaining its rate since October 2011, the central bank said the country’s economy was still recovering from damage to agriculture, manufacturing, mining, construction and utilities by natural disasters in February and storms in December.
Consumption and investment activity have remained buoyant, helped by fiscal support, inflows of remittances, accommodative monetary policy, tourist earnings and favourable labour market conditions, boosting consumer spending and investor sentiment.
A shortage of food and other items following tropical cyclone Winston pushed up inflation to a 2016 high of 5.9 percent in July but since then inflation has decelerated and fell to 3.9 percent in December.
In its previous statement from October the central bank had revised upward its 2016 inflation forecast to 5.0 percent from 3.5 percent previously expected.
The central bank added that it expects domestic factors to continue to drive inflation in the short term with year-end inflation currently forecast around 2.5 percent.
Fiji’s foreign reserves remain adequate at US$1.906 billion as of Jan. 25, down from around $1.983.6 billion as of Oct. 27, 2016.
Source: Central Bank News