Bank review sees lower inflation

BANK of Papua New Guinea has revised downwards its projection of annual inflation to around 4.5 percent in 2018, mainly reflecting lower prices of seasonal items.
According to the bank’s monetary policy statement, in the medium term, the bank projects annual headline inflation to be around 5 per cent in 2019 due to the expected depreciation of the kina before coming down to 4 per cent in 2020.
In considering these developments and projections, it will maintain a neutral stance of monetary policy over the next six months.
“The bank will closely monitor developments in inflation and other macroeconomic indicators, and may adjust its stance as necessary,” the bank said. “It will also monitor outcomes from the proposed strategy for foreign exchange market and changes in conduct of monetary policy to ensure that long-term macroeconomic stability is maintained.”
Meanwhile, the bank said annual headline inflation for the March quarter 2018 was 4.5 per cent, compared to 6 per cent in the March quarter of 2017. “The fall in inflation was due to lower prices of seasonal items and lower imported inflation,” it said.
“High competition, imports from cheaper sources and some import substitution effect also contributed to the downward trend in inflation outcomes.
“The impact of the earthquake in the Highlands region in February on prices was minimal.
“In consideration of the downward trend in annual headline inflation from a quarterly average of 6.7 per cent in 2016 to a quarterly average of 5.4 per cent in 2017, the bank expects headline inflation to be within its initial forecast of 5 per cent in 2018.”