The Bank of Papua New Guinea (BPNG) has announced its monetary policy considerations for the next six months until September of this year. The central bank indicated that it will maintain a neutral stance in line with the country's economic developments and medium-term prospects.
As required by the country's central banking law, BPNG issued two monthly monetary policy statements, including the March 2023 statement presented to the Lae business community. The bank's decision to pursue a neutral stance was based on the projected fall in global growth and inflation this year.
BPNG explained that further tightening could lead to an increase in lending rates, which would negatively impact private sector services and economic activity since lending rates are already high. Therefore, the bank deemed it appropriate to aim for price stability while promoting economic growth.
"We will continue to monitor the ongoing concerns of high inflation and other macroeconomic indicators, and their impact on domestic prices, and growth and employment," BPNG said. "The bank may adjust its stance of policy if required to achieve its objectives and ensure macroeconomic stability."
The global economy is projected to slow down in 2023, with the ongoing Russia-Ukraine war and tighter financial conditions contributing to the decline. Additionally, international commodity prices are expected to fall due to the global slowdown in activity and growth. However, while global inflation is expected to slow, BPNG expects domestic price pressures to remain elevated in 2023 but moderate in the medium term.