, therefore, the central bank will aim at maintaining a substantial amount of free liquidity in the financial system, to drive down market interest rates further. and, in line with this objective, foreign investments abroad by residents have been discouraged, to ensure that there are sufficient funds available for domestic investments. this stance of monetary policy will be reviewed when government ’ s budget for 2010 / 11 is finalized in june this year. now let me say something briefly about interest rates. 4. interest rates and bank fees ladies and gentlemen, in the past twelve months or so, there has been much criticism by the private sector and the public at large of our relatively high interest rate environment. this debate has been ongoing since the outbreak of the global recession two years ago. reflecting the continued easing of monetary policy, the central bank ’ s official interest rates have declined steeply to record low levels. consequently, the commercial banks ’ deposit rates have also fallen sharply. in the event, the commercial banks ’ weighted average lending rate has declined to 10. 7 percent in january this year, from 12. 5 percent in march 2008. the commercial banks have undertaken to effect further reductions in their lending rates in the near future. these further reductions reflect the maturity of several long term wholesale deposits which have been reinvested at lower rates. in the medium to long term, the central bank is aiming at reducing the interest rates in samoa, to be closer to those of our major trading partners ( such as fiji ). that way, our local industries will be able to compete on a more equal footing against their rivals, not only in relation to import prices but export prices as well. the momentum for more meaningful reductions in interest rates is well underway. this, in part, reflects the implementation of a credit friendly monetary policy stance over the past two financial years. moral suasion, the relatively weak state of the domestic economy and the large volume of excess liquidity are factors which have assisted in the central bank ’ s efforts to drive interest rates down. in addition, amendments to the central bank act are currently being proposed to, amongst other things, allow the central bank to extend loans to non - bank financial institutions for specific purposes, as well as regulating bank fees and charges. 5. expanding the central bank ’ s mandate reflecting the leading roles increasingly played by many overseas central banks in driving financial inclusion in their economies, the board of the central bank of samoa recently approved for the bank ’ s mandate to be expanded to include financial inclusion

as well as broader measures of prices indicate that inflation moved down further, even as the economy strengthened. although declining oil prices contributed to this development, pricing leverage in the goods - producing sector more generally was held in check by reduced demand from asia that, among other things, has led to a softening of commodity prices, a strong dollar that has contributed to bargain prices on many imports, and rising industrial capacity. service price inflation, less influenced by - 3international events, has remained steady at about a 3 percent rate since before the beginning of the crisis. some elements in the goods price mix clearly were transitory. indeed, the more recent price data suggest that overall consumer price inflation moved up in the second quarter. but, even so, the increase remained moderate. in any event, it would be a mistake for monetary policy makers to focus on any single index in gauging inflation pressures in the economy. although much public attention is directed to the cpi, the federal reserve monitors a wide variety of aggregate price measures. each is designed for a particular purpose and has its own strengths and weaknesses. price pressures appear especially absent in some of the measures in the national income accounts, which are available through the first quarter. the chain - weight price index for personal consumption expenditures excluding food and energy, for example, rose 1. 5 percent over the year ending in the first quarter, considerably less than the 2. 3 percent rise in the core cpi over the same period. an even broader price measure, that for overall gdp, rose 1. 4 percent. these indexes, while certainly subject to many of the measurement difficulties the bureau of labor statistics has been grappling with in the cpi, have the advantages that their chain - weighting avoids some aspects of so - called substitution bias and that already published data can be revised to incorporate new information and measurement techniques. taken together, while the various price indexes show some differences, the basic message is that inflation to date has remained low. economic fundamentals : the virtuous cycle so far this year, our economy has continued to enjoy a virtuous cycle. evidence of accelerated productivity has been bolstering expectations of future corporate earnings, thereby fueling still further increases in equity values, and the improvements in productivity have been helping to reduce inflation. in the context of subdued price increases and generally supportive credit conditions, rising equity values have provided impetus to spending and, in turn, the expansion of output, employment, and productivity - enhancing