BOJ Maintains Interest Rate at 7.0% for December

  • The Bank of Jamaica’s (BOJ) Monetary Policy Committee (MPC), at its meetings on 18 and 19 December 2023, unanimously agreed to maintain the policy interest rate at 7.0%.
  • Jamaica’s annual headline inflation rate at November 2023 of 6.3% was above the 5.1% at October 2023 but much lower than the peak rate of 11.8% recorded at April 2022. Core inflation (which excludes food and fuel prices from the Consumer Price Index (CPI)) was 5.6% at November 2023, generally in line with the average for the past three months and lower than the 8.4% recorded at April 2022. This trend suggests that core inflation is being contained, which bodes well for the longer-term inflation outlook.
  • The key drivers of headline inflation, such as international commodity prices and shipping costs, continued to decline, and the exchange rate has remained generally stable, given the monetary policy actions as well as strong tourism and remittance inflows. Further, international oil prices have trended below the Bank’s forecast, mainly due to the weaker-than-forecasted impact of production cuts by major oil producers. Average grains prices were also well below the Bank’s forecast and are expected to remain below projections over the near term. Inflation in the economies of Jamaica’s main trading partners has also continued to decline.
  • Importantly, for the BOJ, the increase in inflation in November is consequent on high domestic agricultural prices due to adverse weather and the increase in PPV fares by the government. It, therefore, views the fluctuations in inflation outside the target band as temporary.
  • The risks to the inflation outlook are, however, skewed to the downside (inflation lower than projected), including the possibility that oil and grains prices could trend well below the forecast. Other downside risks also include weaker-than-expected global growth, which could have a stronger-than-projected downward pull on domestic demand and imported inflation, resulting in lower levels of price changes.
  • Future monetary policy decisions will depend on the incoming data. The Committee decided to maintain heightened surveillance of the risks and core inflation. The MPC is prepared to take the necessary actions, including further tightening of monetary policy, if any upside risks to inflation materialise. The date of the next policy decision announcement is 20 February 2024.

(Source: BOJ)