At its meeting on 28th August 2026, the Board of the Central Bank of Solomon Islands (CBSI) decided to maintain the policy rate at 1.5% for the next six months. The decision reflects the Board’s assessment that the current inflation outlook is driven predominantly by supply-side and external factors rather than by excess domestic demand and that a stable exchange rate and subdued domestic demand are expected to cushion, to some extent, the pass-through of external pressures on domestic prices.
The global economic outlook remains highly uncertain, particularly amid the ongoing conflict in the Middle East, which has contributed to higher energy prices, weighing on global growth and slowing the pace of global disinflation.
Headline inflation rose to 4.6% in June 2026, from 0.4% in December 2025, driven largely by supply-side factors. Movements in betel nut prices alone contributed 2.5 percentage points, or 54%, of headline inflation, while higher transport and utility prices linked to the global oil price movements accounted for the remainder. The stability of the exchange rate, together with Government tax exemptions on fuel, has helped mitigate some of the impact of higher global oil prices on domestic inflation.
Inflation is projected to rise to around 5–6% by the end of 2026, reflecting base effects, higher oil prices, and weather-related pressures on domestic food supply. It is expected to moderate to around 4.4% from March 2027, as oil price pressures ease. Core inflation is projected to remain below 1%, indicating subdued underlying domestic demand. However, the outlook remains subject to considerable uncertainty: a further escalation of the conflict in the Middle East, El Niño-related disruptions to food supply, and the pace of fiscal spending could push inflation above 5% in early 2027.
CBSI has revised its 2026 economic growth forecast to 3.0% from an initial projection of 3.8% at the beginning of the year. The revision reflects the impact of higher fuel costs, Tropical Cyclone Maila, and El Niño-related disruptions. Meanwhile, fiscal conditions are expected to become more expansionary in the second half of 2026 following the supplementary budget, which could provide additional support to domestic demand. Economic growth is expected to recover to 3.7% in 2027, supported by mining, infrastructure investment, and continued expansion in the services sector. The external position remains strong, with foreign reserves of $6.9 billion in June 2026, equivalent to 12.5 months of import cover, which is projected to remain adequate through the end of the year. Monetary conditions remain supportive with ample liquidity and moderate credit growth.
“CBSI will continue to monitor macroeconomic developments. If inflation becomes more persistent or begins to broaden into domestic demand, the Bank will reassess its policy stance.”
- Dr Luke Forau, Governor, Central Bank of Solomon Islands
The Bank remains attentive to the risk that supply-side inflation pressures could move above the upper bound of its 2–5% desired range towards the end of 2026 and into early 2027. CBSI will continue to closely monitor developments and adjust its monetary policy stance as necessary to maintain price and financial stability.
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About the Central Bank of Solomon Islands:
The Central Bank of Solomon Islands (CBSI) is the nation’s premier financial institution, responsible for formulating and implementing monetary policy. CBSI oversees and regulates the country’s banking and financial system, ensuring economic stability and growth.
Fore more information contact Central Bank of Solomon Islands Tel: (677) 21791 | Email: umatanani@cbsi.com.sb| info@cbsi.com.sb www.cbsi.com.sb