Bank of Jamaica Further Tightens Monetary Policy  

 

• Bank of Jamaica (BOJ) announced its decision to increase the policy interest rate (the rate offered to deposit-taking institutions on overnight placements with BOJ) by 50 basis points to 6% per annum, effective August 19, 2022.
• The Bank also decided to continue pursuing other measures to contain Jamaican dollar liquidity expansion and maintain relative stability in the foreign exchange market.
• BOJ has indicated that it has been encouraged by the direction of the last three CPI reports. Having peaked in April 2022, inflation in May and June was 10.9%, followed by a slight decline to 10.2% in July. Declining international commodity prices, relative stability in the exchange rate and higher interest rates, have allowed for this trend.
• The Bank, however, believes that the conditions that led to these outturns have not sufficiently solidified to ensure that inflation is sustainably on a downward path. Should these variables begin to solidify in the near future, the BOJ has stated that it is prepared to pause its monetary policy tightening. 
• Inflation is projected to generally stabilize over the remainder of the year, consistent with the consensus forecast for a fall in commodity prices and the Bank’s overall monetary policy stance.
• Inflation is also projected to fall to single digits in early 2023 and to enter the Bank’s target range by the end of 2023, as long as the conflict between Russia and Ukraine does not escalate and inflation among Jamaica’s trading partners continues to fall.
• The Bank’s current decision has resulted in a cumulative increase in the policy rate of 550 basis points since October 2021, which has taken the policy rate to a level that the Monetary Policy Committee tentatively considers appropriate.

(Source: BOJ)