The Reserve Bank of Fiji (RBF) anticipates a gradual increase in headline inflation through 2026 as the temporary impacts of VAT reductions and bus fare subsidies diminish. The bank estimates that inflation will stabilize between 2.5 and 3.0 percent by the end of the year, provided there are no significant economic disruptions.
This forecast came after the RBF Board opted to maintain the Overnight Policy Rate at a low 0.25 percent during its recent meeting. RBF Governor and Board Chairman Ariff Ali indicated that while current monetary conditions are favorable and inflation is presently low, a normalization is expected over time.
“Headline inflation is expected to gradually increase over the course of 2026 as base effects from the lower VAT rate and the bus fare subsidy continue to unwind,” said Mr. Ali, while also emphasizing that the bank’s main objectives—price stability and maintaining adequate foreign reserves—remain intact.
Recent data from the Fiji Bureau of Statistics reveals that annual headline inflation was recorded at minus 2.5 percent in January 2026, a marked decrease from the 2.5 percent noted during the same period last year. This decline has largely been linked to policy-driven price changes, particularly the reduction in VAT and lower fuel and gas prices.
Core inflation, which excludes the more volatile categories of food and fuel, was estimated at 0.8 percent in January, remaining stable compared to the previous year. The RBF interprets this data as an indication that underlying price pressures are being kept in check.
Looking forward, the central bank expects inflation to regain positive momentum as these temporary measures are phased out. Currently, foreign reserves are around $3.6 billion, which should provide a buffer to support ongoing economic stability.
However, Mr. Ali also highlighted some underlying risks, such as possible increases in global commodity prices driven by geopolitical tensions and challenges posed by the ongoing cyclone season, both of which could influence inflation and economic growth. He assured that the RBF will closely monitor the situation to make necessary adjustments to monetary policy to ensure stability.
Overall, while challenges remain, the proactive measures and monitoring by the RBF reflect a commitment to maintaining economic health in Fiji, fostering a landscape of resilience and steady growth in the face of potential hurdles.
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