CBS CONTINUES TO PRIORITISE THE REDUCTION OF HIGH EXCESS LIQUIDITY IN THE FINANCIAL SYSTEM

Thursday, 4th December 2025: At its meeting on the 3rd of December 2025, the Central Bank of Samoa (CBS) Board of Directors approved the continuation of the current Central Bank’s monetary policy stance for fiscal year 2025/2026. This is aimed at reducing the high level of excess liquidity in the financial system.

In making its decision, the Board considered the following updated outlook of the Samoan economy for the remainder of the fiscal year 2025/2026:

1. The main CBS objective of price stability is expected to be maintained. The headline inflation rate is expected to moderate within the 3.0 percent annual target, reaching 2.4 percent in June 2026, slightly lower than 2.6 percent in October 2025. Domestic food price increases are projected to slow down, while imported prices may rise slightly but subject to overall global prices for oil, food, and building materials, which will be driven by global demand conditions.

2. Economic growth will stay strong. Samoa’s economy is expected to grow by 5.0 percent, higher than the 3 percent to 4 percent medium-term goal. This will be supported by major public and private investment projects, higher government spending and a continued strengthening in the external sector.

3. Foreign reserves will remain more than adequate. Official government inflows, tourism revenues, and remittances (including seasonal worker income) will help lift foreign reserves to about SAT$1.7 billion, which will cover 15.9 months of goods—well above the minimum requirement of 4 months.

4. The financial system remains sound and highly liquid. Commercial banks continue to be well-capitalized, with good asset quality. The financial sector is expected to stay strong, supported by ongoing infrastructure reforms that aim to improve access to financial services.

As a result, the Central Bank’s monetary policy priority will be to continue reducing the high excess liquidity in the financial system through its open market operations. The issuance of all tenors of its Security papers, particularly the medium to longer-term maturities will be maintained. The Central Bank will also keep its official interest rate—currently 2.58 percent—within the target range of 2 percent to 3 percent over the medium term.

CBS acknowledges the presence of major downside risks in its economic outlook, especially external risks such as global trade tensions and geopolitical issues including the ongoing conflict in the Middle East, which could adversely drive up global commodity prices. In view of this, the Central Bank will remain vigilant in monitoring such external developments and its impact on Samoa’s economy. Where appropriate and needed, the Central Bank will adjust its monetary policy stance accordingly.