CBSI keeps its policy rate at 1.5% as inflation rises, warning pressures could reach 5–6% by the end of 2026.
The Central Bank of Solomon Islands (CBSI) has kept its policy rate unchanged at 1.5 per cent for the next six months, while warning that inflationary pressures could strengthen towards the end of 2026.
The decision followed the CBSI Board’s meeting on 28 August 2026, where members assessed the country’s inflation and economic outlook.
According to CBSI, the recent increase in inflation is being driven mainly by supply-side pressures and external factors, rather than strong domestic demand. A stable exchange rate and relatively subdued domestic demand are expected to help limit the impact of rising international prices on Solomon Islands consumers.
Headline inflation reached 4.6 per cent in June 2026, rising significantly from 0.4 per cent in December 2025.
The Bank attributed much of the increase to higher betel nut prices, which contributed 2.5 percentage points, or 54 per cent, of overall headline inflation. Increases in transport and utility costs, partly associated with movements in global oil prices, also contributed to the rise.
CBSI expects inflation to climb to between 5 and 6 per cent by the end of 2026, before easing to approximately 4.4 per cent from March 2027 as pressures from oil prices are expected to moderate.
Core inflation, meanwhile, is forecast to remain below 1 per cent, suggesting that underlying domestic demand remains relatively weak.
CBSI Governor Dr Luke Forau said the central bank would continue watching developments closely.
“CBSI will continue to monitor macroeconomic developments. If inflation becomes more persistent or begins to broaden into domestic demand, the Bank will reassess its policy stance.”
The inflation outlook remains exposed to several risks, including a possible escalation of conflict in the Middle East, El Niño-related impacts on food production and supply, and the effects of increased government spending.
The CBSI has also maintained that monetary conditions remain supportive of economic activity, with sufficient liquidity in the financial system and moderate credit growth.
The Bank said its current assessment indicates that external and supply-related pressures are responsible for much of the inflation increase, while weak domestic demand continues to contain underlying price pressures.
Looking ahead, CBSI will closely monitor whether inflation moves beyond its 2–5 per cent desired range and will adjust its monetary policy if necessary.
The Bank said its priority remains maintaining price and financial stability while supporting sustainable economic activity.
By; Steven Kamoa
