Central Bank of Seychelles maintains policy stance as rates remain unchanged

The Central Bank building. (Seychelles News Agency)

(Seychelles News Agency) - The Central Bank of Seychelles (CBS) is maintaining its tight monetary policy stance for the third quarter of 2019, ensuring that the bank attains its primary objective of price stability, said a high official on Thursday.

The decision, taken by the Board of CBS on June 24, means that the monetary policy rate remains at 5.5 percent for the next three months. A rise in the rate indicates a tightening while a fall signals a loosening of the policy stance.

An unchanged monetary policy rate means the interest rate of 2.5 percent that will be transacted with commercial banks when depositing excess money with Central Bank remains in place. The credit facility at a rate of 8.5 percent when banks borrow money with CBS is also maintained.

The first deputy governor of the Central Bank, Christophe Edmond, told the press that the bank has taken into account developments both on the local and international market that can affect the price of services and commodities.

“On the international market, we have seen that the price of commodities is going up. When we compare it to April 2019, the price of food internationally has increased by 1.2 percent for the month of May. We have also seen that the price of oil is higher as compared to three months ago and this is around $71 per barrel,” said Edmond.

On the domestic market, statistics show that inflation is moderate since the start of the year, he added.

“We look at factors that contribute to an increase in inflation. These include categories that we call non-food, a category that has gone up by 2.6 percent. Within this category cigarettes have gone up by 12 percent, education by 8.2 percent and housing, water, electricity and gas had gone up by 8.1 percent,” explained Edmond.

He said that “on the other hand, when we look at food, we have seen that it has gone down by 1.9 percent and fish has gone down by 8.5 percent.”

The tourism industry remains a key contributor to the country’s economic performance. From the start of the year to June 23, Seychelles received 181,694 visitors which represents a nine percent increase compared to the same period in 2018.

In a press communique, CBS said that “tourism earnings are also projected to be higher in 2019 compared to 2018, by around 6 percent in US dollar terms. This is largely due to the aforementioned positive growth in visitor arrivals, partly as a result of increased flight frequency and connectivity.”

The main factors expected to have an impact on inflation include the revision in domestic utility tariffs and tariff rebalancing programme, sustained credit demand and ongoing construction projects that may pick up pace.

Fiscal policies such as the long service allowance, alcohol policies and the 2020 election as well as uncertainties which include fiscal support to Air Seychelles and inconsistent and sudden policy amendments also have an impact on inflation.

The Central Bank of Seychelles remains vigilant and stands ready to adjust its policies as needed to promote price stability.