The Central Bank of Solomon Islands (CBSI) board has decided in its meeting on Thursday 27th March 2014 to move away from the moderate contractionary monetary policy stance that prevailed in the recent six months to a neutral monetary policy stance over the next six months.
The decision reflects current inflation trends and expected macroeconomic conditions for 2014.
The Governor and Chairman of the board, Mr. Denton Rarawa explained that the neutral monetary policy stance will involve maintaining the current exchange rate regime, not altering the cash reserve requirement at 7.5%, and to halt the growth of auctioned Bokolo bills to current levels of $710 million.
The CBSI anticipates the Solomon Islands economy to rise moderately in 2014 to 3.7% from 3.2% in 2013. The growth is expected to be driven by all sectors except for forestry. Gross foreign reserves are anticipated to rise moderately in 2014 on the back of expected inflows from donors and foreign investments.
The large external inflows combined with private sector credit growth and rising fiscal expenditures are expected to drive monetary growth in 2014.
In view of the domestic and external sector developments, average headline inflation is expected to be within the forecasted range of 4%-6% in 2014.
The CBSI will continue to monitor future macroeconomic developments and will be ready to act if conditions encouraging domestic price stability change.
For a copy of the full statement, please go on-line to the CBSI website.