The Reserve Bank of Fiji has maintained its Overnight Policy Rate at 0.25 percent, citing the need to balance rising inflationary pressures with continued support for economic activity.

Governor and Board Chairman, Ariff Ali, said the decision reflects growing concerns about inflation driven by factors outside Fiji’s control, particularly escalating global fuel prices linked to the ongoing conflict in the Middle East.
“Monetary policy must carefully balance the need to contain rising inflation driven by external factors while supporting economic activity,” Ali said.

He noted that inflation is expected to continue increasing in the near term, with higher fuel costs already filtering through to transport and electricity prices.

Recent data show that headline inflation rose to 1.8 percent in April after more than a year of deflation, largely due to higher prices for fuel, food and kava. Core inflation also increased to 1.7 percent, driven mainly by rising kava prices.
“The extent of these price pressures will depend on how long the conflict lasts and how severe it becomes,” Ali said.

Despite inflationary pressures, the Governor said economic activity remains supported by strong remittance inflows and tourism performance, although there are early signs that overall growth is beginning to moderate.

The country’s foreign reserves remain healthy at approximately $3.4 billion as of May 28, enough to cover 4.9 months of retained imports.

Ali said reserves are expected to remain adequate in the near to medium term, supported by more moderate import demand as economic activity slows.

The RBF also highlighted the strength of the financial sector, noting that liquidity stood at $1.6 billion as of May 27 while lending to the private sector continues to grow.

“Financial stability remains intact with the banking system adequately capitalised to withstand temporary global and domestic shocks,” Ali said.

He added that current economic conditions support maintaining the existing monetary policy stance, which is expected to provide continued stability to the economy.

However, the central bank warned that risks remain.

Inflation could rise further if global fuel prices remain elevated, while tighter financial conditions in major tourism markets could dampen travel demand and reduce foreign exchange earnings.

Domestically, inflation is also expected to increase further in 2026 following Energy Fiji Limited’s recent electricity tariff increase of 5.91 cents per unit.

According to the RBF, the electricity surcharge is estimated to add around 0.5 percentage points to inflation, while the fuel price increase announced in May could contribute a further 0.9 percentage points.

The bank also warned that prolonged geopolitical tensions and sustained high oil prices could increase fuel and freight costs, widen Fiji’s trade deficit and place pressure on foreign reserves.

Nevertheless, expected offshore loan drawdowns by Government later this year are expected to help cushion reserve levels.

“The Reserve Bank is closely monitoring these developments and will take necessary actions if required, to safeguard macroeconomic stability, consistent with its mandate,” Ali said.