CBS explains finance terminologies to journalists |29 September 2014

As part of its financial literacy programme, the Central Bank of Seychelles (CBS) conducted an economic awareness session recently with journalists from various media houses in Seychelles.

The session at the bank’s training room was conducted by Naddy Marie, economist/communications coordinator of the policy & research section within the research and statistics division of the CBS.

CBS governor Caroline Abel was also present.
This was the first of many economic awareness interaction sessions the bank is planning with various segments of society on a number of economic and financial matters.

During the presentation, Mr Marie focussed on three main topics – inflation, monetary policy and exchange rate.
Today Business Nation focuses on inflation. But first of all what is the role of the CBS?

The primary objective of the CBS is to promote domestic price stability. The other objectives are : a) to advise the government on banking, monetary and financial matters, including the monetary implications of proposed fiscal, credit policies or operations of the government; and (b) to promote a sound financial system.
TABILITY
What is price stability?
Price stability is when prices remain stable over time, or when they are rising at a very low and predictable rate.
Inflation is defined as a sustained increase in the general level of prices for goods and services.

What causes inflation?
Examples of inflation can be changes in prices; high exchange rates; low supply and high demand and price increase on the international markets for example with regard to oil.

Is inflation good or bad?
Inflation is good when it is better than deflation or unchanged prices which regresses the economy; it promotes healthy economic growth as there is demand and it allows prices to adjust.

Inflation is bad when it creates uncertainty and less investment; reduces the consumers’ ability to purchase as prices are high and reduce value of savings because when you are spending more money on purchases you are not left with much to save. Sometimes a country needs a little inflation as it is a means to warn the people that perhaps we are spending too much.

So inflation is good when it is in moderation as it encourages economic growth.

How can we manage inflation?
Spending tomorrow versus spending today.
For example if prices continue rising and consumers continue buying, they contribute towards inflation. The best thing to do is to do a budget and check your priorities. Is it necessary to buy let’s say an Ipad or new dress now or it can wait until prices stabilise?

Brand choices which means you do not necessarily have to buy a designer brand when there are other affordable ones that can serve the same purpose.

Spending choices - “productive” versus “unproductive” spending. A good example can be on loans consumers take. It is better to take a loan to set up a small business which will be productive later on than taking a loan to travel or to shop for stuff that brings no return in the end.

There are also decisions (and interpretation of decisions) made by government or CBS. For example removing rupees from the economy when there are too many and are affecting economic growth. Also by stabilising the exchange rates when rising too much.