BY NED GAGAHE
Governor of the Central Bank of Solomon Islands, Dr Luke Forau, says headline inflation fell sharply in 2025, reflecting improved domestic supply conditions and easing global prices.
Speaking during a press conference on Thursday, 19 February 2026, Dr Forau revealed that headline inflation dropped from 3.7 per cent in June to 1.6 per cent in December 2025.
He attributed the decline to lower prices for fruits and vegetables in the domestic market, as well as reduced imported inflation supported by stable global oil and food prices.
Looking ahead, the Governor cautions that inflation is expected to rise temporarily in the first quarter of 2026 due to weather-related supply disruptions experienced earlier this year.
“However, as supply conditions normalise, inflation is projected to ease to around 3.5 per cent by June and settle at about 3.4 per cent by the end of 2026,” Dr Forau said.
He said key risks to the inflation outlook, include elevated geopolitical tensions that could drive up oil prices, extreme weather conditions affecting local food production, and ongoing structural inefficiencies within domestic markets.
“Should these risks materialise, inflation could rise above the current forecast,” he warned.
Dr Forau said that inflation in Solomon Islands is largely influenced by supply-side factors and global price developments, rather than strong domestic demand.
To better assess underlying demand pressures, the Bank monitors core inflation, which excludes volatile items such as food and energy.
Core inflation remained subdued in 2025, declining from 1.2 per cent in June to 0.9 per cent by year-end. It is projected to increase slightly in 2026 alongside stronger economic activity.
The Governor said that much of the recent inflation movement has been supply-driven. While global fuel prices remained relatively stable throughout 2025, temporary domestic shortages — such as betelnut — led to short-lived price spikes.
“Such cost-driven inflation is an area where monetary policy has limited direct influence,” he said.
Dr Forau said that addressing these pressures requires broader structural measures.
He pointed to government initiatives including investments in hydropower, infrastructure repairs following heavy rainfall, support for farmers to boost production, and efforts to strengthen disaster resilience.
During the recent rainy spell in January and early February, 33 policyholders received payouts under the newly introduced parametric insurance scheme. The Governor encouraged more farmers to participate in the scheme to safeguard their livelihoods against climate-related shocks.
He added that these initiatives complement the central bank’s mandate of maintaining price stability through managing liquidity and overall demand in the economy.
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