BOJ Hikes Its Policy Rate to 6.50%

• The Bank of Jamaica (BOJ) continues its series of policy rate hikes by increasing its policy rate to 6.50% from 6.00% as at September 29, 2022, which represents the 10^th consecutive rate hike since a similar period last year.
• At its meetings on September 27^th and 28^th, the Monetary Policy Committee (MPC) noted that, while the key drivers of inflation and other economic indicators are trending in the right direction, conditions have not sufficiently solidified to ensure that inflation is sustainably on a downward path.
• This higher rate will filter through to make credit more expensive, which should temper investments and consumer demand. Further, the MPC noted that the pace of monetary tightening among Jamaica’s main trading partners such as the US has accelerated. This more aggressive stance by the US in particular could result in US dollar assets becoming more attractive relative to those denominated in Jamaican dollars.
• This could cause capital outflows, prompting a faster pace of exchange rate depreciation and, consequently, a derailment of the Bank’s efforts to manage inflation. Therefore, to mitigate these risks and to facilitate a return of inflation to the target range in the shortest possible time, the MPC unanimously agreed to further increase the policy rate to 6.50%.

(Source: BOJ)