The National Reserve Bank of Tonga has maintained a neutral monetary policy stance for the next six months, keeping the monetary policy rate at 2%, the interest rate corridor at 0% to 4% and the Statutory Reserve Deposit rate at 15%. Headline inflation reached 9.3% in July 2026, well above the bank’s 5% reference rate, but was driven mainly by external supply shocks rather than domestic demand pressures. Inflation is expected to remain above the reference rate in the immediate term before falling below it by the end of fiscal 2027. Foreign reserves remain above required thresholds and are expected to be adequate in the near term, while credit growth moderated to 4.9% in June and interest rates were broadly stable. Excess liquidity also declined as National Reserve Bank of Tonga Notes became the standard instrument for monetary policy operations, supporting the bank’s efforts to improve transmission to liquidity, interest rates, credit conditions and inflation. The stance remains data-dependent, and the bank is prepared to adjust policy if demand-driven inflation or second-round effects intensify. It will monitor core inflation, credit and liquidity conditions, foreign reserves, exchange-rate pressures, remittances, import prices and the absorption of excess liquidity.
2026-08-27National Reserve Bank of Tonga
National Reserve Bank of Tonga maintains neutral stance for six months, holds policy rate at 2% despite 9.3% inflation
The National Reserve Bank of Tonga maintained a neutral stance for six months, holding its policy rate at 2% despite headline inflation of 9.3% in July 2026. Inflation is expected to fall below the bank’s 5% reference rate by the end of fiscal 2027. The bank remains prepared to adjust policy if demand pressures or second-round effects intensify.