- Decision
- Maintain
- Rate change
- 0 bps
- Kina facility rate
- 5%
The Bank of Papua New Guinea’s Monetary Policy Committee (MPC) left the Kina Facility Rate (KFR) unchanged at 5.0 percent at its 3 March 2026 meeting, judging the current stance as sufficiently supportive of a still-subdued non-mineral economy while keeping inflation near target amid contained domestic price pressures and heightened global uncertainty from escalating Middle-East conflict. The decision extends a steady policy path that has seen the KFR held at 5.0 percent since a 100 bp hike in September 2025. Operational settings were left intact: the cash reserve requirement remains 9.0 percent, repo and reverse-repo margins stay 200 bp above/below the KFR, and 7-day fixed-rate full-allotment and 28-day central bank bills as well as weekly FX auctions continue under the crawl-like exchange-rate regime that serves as the primary nominal anchor. Headline CPI is projected around 4.0 percent, with core inflation easing toward 2.5–3.0 percent, while output growth is described as moderate, underpinned by near-capacity production at Porgera but muted non-mineral activity. The MPC acknowledged persistent foreign-exchange order backlogs and agreed that further measured Kina depreciation is needed to address the currency’s estimated overvaluation and support external balance. It noted resilient global growth and easing worldwide inflation but flagged risks from higher energy and shipping costs linked to regional hostilities. The Committee pledged close monitoring of geopolitical and domestic developments and reiterated its readiness to adjust policy to safeguard stability and advance the goal of full Kina convertibility.
Rate evolution
From June 2025 to September 2026, the Bank of Papua New Guinea raised the Kina Facility Rate by 100 basis points from 4.0% to 5.0% after an initial hold, then kept it unchanged at subsequent meetings. The June pause reflected easing underlying inflation, better foreign currency availability and a balanced outlook, although headline inflation had turned up on domestic non-tradable prices, liquidity was uneven across banks and global trade uncertainty was rising. The September 2025 increase was presented as support for the exchange rate’s role as the nominal anchor rather than broad tightening, with headline inflation moderating but core inflation still elevated, the Kina continuing to depreciate, growth prospects strengthening and risks from US tariffs, geopolitics and fiscal vulnerabilities present.
Through March 2026, the Committee judged 5.0% appropriate as inflation remained contained and core pressures trended lower, but stayed cautious over the temporary effect of GST relief, foreign exchange pressures and Middle East-related risks to energy, shipping and imported inflation. In September 2026, it again held the rate at 5.0% after headline inflation rose to 5.3% in the June quarter from 2.2% in March, while trimmed mean inflation was 2.7% and exclusion-based inflation was 3.2%, providing no clear evidence that price pressures were becoming more persistent. The Bank cited higher food and fuel prices, El Nino-related shortages, exchange-rate pass-through and production costs, while noting uneven domestic growth, improving foreign exchange conditions and weak policy transmission, and signalled that a broader and more sustained increase in underlying inflation would warrant reassessment.