The Central Bank of Seychelles (CBS) has announced that it is maintaining an accommodative monetary policy for the final quarter of 2024, although it remains vigilant about various factors that could affect the island nation's economy.

The governor of the CBS, Caroline Abel, made the announcement on Tuesday in a press conference in which she shared that the monetary policy rate will remain at 1.75 percent.

"We have taken this decision based on the evaluation of information on international developments that can affect Seychelles, and also developments in the financial systems and the domestic economy," said Abel.

She explained that CBS has seen an improvement in developments in the major economies of the world.

Falling inflation has seen several central banks cut their policy rates in recent months, such as the Bank of England, which reduced their key interest rate by 25 basis points, the first cut since March 2020.

The U.S. Federal Reserve Bank announced its long-awaited rate cut of 50 basis points in September 2024, which marked its first reduction in four years. In the same month, the European Central Bank reduced its key policy rates by 25 basis points, its second successive rate cut since June 2024.

Since the start of the year, the price of food and oil has typically climbed internationally and in July, oil prices hit $85 per barrel, up from $80 per barrel in January 2024.

This was a result of ongoing oil production cuts by the Organisation of Petroleum Exporting Countries and other partner nations (OPEC+), as well as price pressures brought on by Middle East geopolitical unrest.

However, oil prices hovered around $70 per barrel in September 2024 on account of sluggish global demand for oil.

Abel said, "We have to take into account that the countries that produce oil, have extended the length of time that they will increase production, which means that with that, there could be some pressures, but in general the price has gone down."  

The rising demand for different commodities and the possibility of unfavourable weather events are expected to drive up food costs internationally in the coming months. The geopolitical disputes in the Middle East and the Black Sea region may result in longer shipping routes and greater freight costs, which could worsen the previously outlined outlook for global food and oil prices, according to CBS.

Locally, tourism continues to drive the Seychelles' economy, although as at September 15, a total of 241,344 visitors arrived in the country, 0.08 percent less than it was in 2023 over the same time frame.

The number of tourists has grown at a slower rate than it did at the beginning of the year, mainly due to a decline in arrivals from important source markets including France, the UK, Italy, and Russia.

Traveller arrivals are anticipated to rise in the fourth quarter due to enhanced air connectivity brought about by multiple carriers starting flights again. The yield per tourist is anticipated to stay low, nevertheless, due to increased competition in other locations.

On the foreign exchange market's developments, as of September 20, 2024, both supply and demand had increased overall compared to the same period in 2023.

During the same period, there was a decline in the value of the domestic currency relative to the major currencies that were exchanged.

Future foreign exchange inflows will primarily depend on how well the tourism industry performs, while demand for foreign exchange is anticipated to rise in tandem with the fourth quarter's economic uptick.

From May 2024, there has been an increase in the annual inflation rate and as a result, August 2024 saw an increase in average prices for goods and services of 0.5 percent over August 2023.

However, the 12-month average inflation rate in August 2024 was negative 0.9 percent and for the domestic pricing outlook, a gradual rise in inflation is projected over the medium term.

"We have to remain vigilant and continue to follow what is happening in the world, as there are things that can happen so fast and affect Seychelles, and so we must all prepare ourselves so that any of these issues will not affect us too much," concluded Abel.