THE Central Bank will be closely monitoring the increased economic activities in line with the start of the construction phase of the PNG LNG project.
Central Bank governor Loi Bakani in the economic bulleting, for the December quarter last year, said this would be in line with the bank’s projection of inflation at 8% for this year.
In the bulleting released on Tuesday, Mr Bakani said: “The upside risks to inflation could come from a weaker kina, increased economic activity and, thus, increased domestic demand
pressures associated with the commencement of construction for the LNG project; high imported inflation, increased wage pressures, and excessive Government spending.
“The Central Bank will closely monitor these developments and adjust its monetary policy stance where
necessary to contain inflation,” he said.
According to the bulleting an easing in the annual headline inflation from 10.2% in March quarter to 5.3% in the September quarter last year prompted BPNG to ease its monetary policy for December.
The policy signaling interest rate, the kina facility rate (KFR) was reduced by 1.0% to 7.0%.
Since then, KFR has been kept unchanged to this month in view of inflationary pressures.