Media Release |
FOR IMMEDIATE RELEASE 12 March 2025
The newly established Monetary Policy Committee (MPC) maintained the Kina Facility Rate (KFR) at 4.0%, while reducing the Cash Reserve Requirement (CRR) to 11% at its inaugural meeting on 11 March 2025. The MPC also emphasised the importance of resuming the gradual depreciation of the Kina towards a market-clearing level. This adjustment is necessary to improve external competitiveness and support long-term macroeconomic stability.
The Committee noted inflationary pressures had moderated and current indicators do not justify a change to the policy rate at this time. However, the MPC remains vigilant regarding global economic developments, especially potential inflationary impacts from external sources and the exchange rate depreciation on domestic prices.
The Committee reviewed the impact of monetary policy tightening over the past twelve months and noted mixed results. Previous increases in the CRR (to 12%) had a more pronounced effect on borrowing costs for the public sector, while the cost of borrowing for the private sector remained relatively unchanged. Although overall liquidity in the financial system remains sufficient, it is unevenly distributed among the commercial banks.
Members noted that the decision to maintain the KFR at 4.0% while lowering the CRR to 11% should not be viewed as an easing of monetary policy. Rather, it reflects an adjustment to previous policy settings in response to current conditions and the uneven distribution of liquidity within the financial system.
As this was the inaugural meeting of the newly established MPC, members expressed a range of views on appropriate policy settings. Given this context, the Committee agreed to keep explanations concise and focused primarily on each individual’s rationale behind voting decisions.
Future meetings will offer opportunities to provide more comprehensive analysis and broader context, as Committee members develop a shared understanding and familiarity with key policy issues.
Authorised by:
Ms. Elizabeth Genia
GOVERNOR | on behalf of the MONETARY POLICY COMMITTEE
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