Vanuatu’s monetary policy remains stable to prevent inflation from rising, ensuring economic stability and maintaining the purchasing power of its citizens, according to Reserve Bank Governor August Letlet.

Inflation, which refers to the increase in the cost of goods and services that reduces consumers’ purchasing power, has significantly declined in recent months. Letlet highlighted that in June 2023, Vanuatu’s inflation rate stood at 14.4%, but through monetary tightening, it has been reduced to 1.9% deflation as of today.

“Monetary conditions remain tight because we do not want inflation to rise in the country. In June 2023, inflation was at 14.4%, but we have managed to bring it down to 1.9% as of September 2024,” Letlet explained. “In economic terms, this is called price stability. We want to ensure investor confidence so they can plan without prices exceeding a 4% increase. When inflation surpasses 4%, it erodes purchasing power and affects business profitability. While the current situation is not entirely good or bad, maintaining inflation under control is a result of our tightened monetary policy.”

The Reserve Bank continues to monitor economic conditions, aiming to sustain stability while encouraging economic growth.