The Monetary Policy Committee (MPC) of the Bank of Jamaica (BOJ) met on November 11 and 12 and announced its decision to raise its policy interest rate on November 16, effective November 17, by 50 basis points to 2% per annum, including other measures to contain Jamaica dollar liquidity expansion. This was a follow up to a previous decision made at the end September to raise interest rates by 1%, from the previous 0.5% where they had been from August 2019.
The Bank of Jamaica has had an accommodative monetary policy posture for a number of years, progressively cutting interest rates to an all-time low of 0.5% to try to achieve faster economic growth, helped by the fact that inflation has generally been within the Bank’s target range. With the advent of the Covid-19 pandemic, the Bank injected significant liquidity (both Jamaican and US dollars) into the system, amounting to approximately $313 billion, or 16 per cent of GDP, but did not change the policy rate.
The MPC however also signalled its intention to consider further reducing the level of monetary accommodation to bring inflation back within its target range of 4 to 6% at subsequent policy meetings, subject to inflation and other macroeconomic data's evolving as projected, including raising the policy rate further, and by extension, real interest rates, which it describes as “significantly negative”. It intends to limit the second-round effects of recent shocks and to guide inflation back within the target range within the next two years.
In this report, we also review current growth and inflation trends, as well as the prospects for the tourist industry.
Now read on...
Register to sample a report