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Monday, July 03, 2006

Reserve Bank of Fiji raises official interest rates again

The Reserve Bank of Fiji (RBF) has raised official interest rates from 3.25% to 4.25%. The rate rise is the second this year. In line with the rate hike, the RBF's Minimum Lending Rate will also increase to 5.25%. These new rates came into effect on Thursday, 29 June.

The RBF said in raising interest rates for the second time this year, the Board noted that the pattern of growth in Fiji continued to be unchanged driven by strong domestic demand, which had led to buoyant imports while improvements had yet to be seen in the export sector. The situation was worsened by high oil prices.

According to the RBF, the decision supplements the recent actions by the RBF to slow the rise in credit and dampen demand by raising interest rates and tightening domestic liquidity.

To contain the potential impact these interest rate hikes have on investment spending, the RBF has issued lending guidelines to banks and credit institutions to continue to support priority sectors of the economy, particularly investment.

With interest rates on the lower to middle end of the spectrum in relation to Fiji's trading partners, the RBF is of the view that the level of interest rates in Fiji is not likely to deter investment spending in the economy.

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