The Reserve Bank of Fiji Board has decided to reduce the overnight policy interest rate by half a percent; down to 2 percent from 2 point five.
The Acting Chairman of the bank's Board, Adish Narayan, said the current trend and outlook for inflation posed some concern.
Inflation rate rose to 5 point nine percent in January from 5 percent in December.
But he said on balance, the reduction in the overnight rate was appropriate considering the still very weak domestic economic conditions.
Mr Narayan said the latest surge in oil prices coupled with high food costs could dampen the global economic recovery and negatively affect Fiji's tourism and export industries.