THE Reserve Bank of Fiji has kept the Overnight Policy Rate (OPR) at 0.5 per cent.
"While tensions of a possible deeper global economic downturn have eased, downside risks remain and conditions remain fragile," Reserve Bank governor and board chairman Barry Whiteside said.
"The possible spillover effects to our major trading partner countries appears limited for now, but any further deterioration in the global economy can negatively impact our current account balance, foreign investment flows and the domestic economy at large. Our monetary policy objectives are expected to remain intact this year. Besides, given the persistent concerns for the fragility of the global economy and slower trading partner economies' growth and their impact on the domestic economic outlook, the current stimulatory monetary policy stance remains justified to support domestic demand and growth in the Fiji economy".
Mr Whiteside added that while domestic growth was expected to remain positive this year, partial indicators suggested continued negative performances in the labour market and a slowdown in the housing sector, reflecting the subdued state of investment activity in the economy.
Damage from the recent flood is expected to further slow recovery in major sectors for agriculture and sugar and therefore put a drag on the growth forecast for this year.
However, reconstruction work should provide some positive impetus to the economic recovery.
"External sector developments remain stable, as higher travel and gold receipts combined with modest outflows for imports, dividends and other related payments, continue to support a comfortable level of foreign reserves," Mr Whiteside said.
Inflation is expected to moderate towards 3.5 per cent by year-end despite the recent surges in food prices because of the floods.
Mr Whiteside said the underlying measures of inflation have subsided to below 3 per cent in February, implying an easing of inflationary pressures over the medium term.
However, a higher inflation outcome is still possible because of higher crude oil prices, given the existing geo-political tensions in the Middle East, and the impact of the recent flood.
Mr Whiteside said the central bank would continue to monitor the latest global and domestic developments and align monetary policy accordingly.