Central Bank reduces KFR

The Bank of PNG has further reduced the Kina Facility Rate (KFR) from 6 percent to 5.5 percent following ongoing improvement in economic activity in the second quarter of 2019.

The reduction of the KFR by the Central Bank will see reduction in market interest rates for the month of August.

This was possible after non-mineral private sector activities remained robust, and stability in the prices of goods and services (inflation) and the Kina value (exchange rate), among macroeconomic indicators.

This is the second reduction for the year after the Central Bank decreased the KFR from 6.2 to 6 percent following a pick-up in the non-mineral private sector, relative stability in the exchange rate, and fall in inflation.       

An easing of monetary policy, in this case the Kina Facility Rate, generally aims to lower interest rates and make credit more easily available to businesses.

The Central Bank introduced the KFR in February 2001, as an official rate to indicate its stance of monetary policy.

The KFR is a monthly rate and any changes to it should translate to market interest rates.

Cedric Patjole