PNG Kina depreciates against US dollar

PNG Kina depreciates against US dollar. Picture: POST COURIER

PORT MORESBY, 03 APRIL 2019 (POST COURIER) – The Papua New Guinea kina has further depreciated against the US dollar last month from $0.2970 at the end of December 2018 to $0.2965.

This is a further depreciation of the kina from the end of December 2017 when the US dollar was pegged at $0.3095.

BPNG Governor Loi Bakani in the latest monetary policy statement said this depreciation against the US dollar reflects the continued high import orders in the market.

But he mentioned that the kina has performed extremely well against the Australian dollar which saw it appreciate from $0.3967 at the end of December 2017 to $0.4208 at the end of December 2018.

He said over the first quarter of 2018, it further appreciated to $0.4195.

“The movement in the kina against the Australian dollar mainly reflected the strength of US dollar against the Australian dollar,” he said.

As a result, Bakani while commenting on the monetary policy stance and conduct of the Central Bank, said the annual headline inflation for 2019 is projected by the bank to be around 4.0 per cent and the trimmed and exclusion-based measures of inflation to be around 3.5 per cent and 4.0 per cent respectively.

He said this projection considers some depreciation of the kina, lower imported inflation and domestic demand, cheaper imports from alternative sources and increased competition.

“Over the medium-term, the bank projects annual headline inflation to be around 4.5 per cent in 2020 and 3.5 per cent in 2021.

“The risks to these projections include higher than expected imported inflation, government spending over and above the budget and its impact on import demand, faster pace of kina depreciation and unforeseen domestic supply demand shocks,” he said.

Bakani said the Central Bank maintained a neutral monetary policy stance over the six months to March 1, 2019 by keeping the policy signaling rate and the monthly Kina Facility Rate (KFR) at 6.25 per cent.

“In deciding the stance of policy, the bank took into consideration the downward trend in headline inflation outcomes, stable outlook for headline inflation, and the relative stability of the kina exchange rate over the six months to March 2019.

“While these factors point to easing of the policy rate, the increase in underlying inflation outcomes indicate increasing inflationary pressures-and therefore the bank maintained a neutral stance,” he said.

“Considering the easing in headline and underlying inflation and the forecasts of other macroeconomic indicators, the bank will continue to maintain its stance of monetary policy for the next six months.

“The bank will closely monitor these developments and their impact on inflation and other macroeconomic indicators, and adjust its stance as necessary to ensure that price stability is maintained,” he said.

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