Fiji Times: Inflation rate to rise: RBF

Elenoa Baselala
Tuesday, April 17, 2012

THE Reserve Bank of Fiji has predicted the inflation rate to go higher than the 6.2 per cent recorded in February.

In January, the rate was 5.9 per cent.

The central bank said the increase in February reflected the effects of the January floods, which led to higher food prices.

"Risks to the inflation outlook are tilted to the upside, considering the volatility of oil prices associated with the geo-political tensions in the Middle East," the bank said in its latest economic review.

"Food prices have regained some strength more recently but are expected to decline slightly over the year. In addition, the current moderation in growth by the world's second largest user of crude oil China is expected to restrain any upward pressure on oil prices."

However, the bank estimated the inflation rate to moderate towards 3.5 percent by the end of this year.

Inflation is the rise in prices of goods and services. When inflation increases, the purchasing power decreases.

The negative effects of inflation include a decrease in the real value of money and other monetary items over time, uncertainty over future inflation which may discourage investment and savings, and if inflation is rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future.

The central bank said investment activity was envisaged to slowly pick-up in the near term which was attributed to a number of upcoming investment projects.

However, it said, recent investment intentions and activities were focused on Fiji's resource and tourism sectors, suggesting subdued fixed capital formation in other major industries.

Annual growth in broad money supply accelerated in February to 15.4 per cent, from 14 per cent in the previous month.

Yearly growth in net domestic credit was led largely by private sector credit, which rose by 5.8 per cent in February, from 6.2 per cent in the previous month.