BOJ Cuts Policy Rate Again
- On August 27, 2019, the Bank of Jamaica announced that it will be lowering the policy interest rate (the rate offered on overnight placements with Bank of Jamaica) by 25 basis points to 0.50%, effective Wednesday, 28 August 2019.
- Although BOJ anticipates that inflation will average 4.3% over the next 8 quarters, it has decided to cut the rate because of the likelihood that inflation will fall below the lower limit of the 4.0%-6.0% target range at various points over the period if there is no policy response.
- The Central Bank’s inflation forecast is also influenced by the continued impact of low domestic demand conditions relative to the economy’s capacity; slower growth among Jamaica’s main trading partners; and declines in international commodity prices. It also accounts for the impact of imminent changes in the fuel mix in the domestic energy sector on electricity rates.
- BOJ’s decision to cut the rate is intended to stimulate a faster expansion in private sector credit, which should lead to higher economic activity, consistent with the inflation target. This action will support inflation returning more quickly to the center of the target.