February 18, 2022
BANK OF JAMAICA REDUCES MONETARY ACCOMMODATION
- Inflation has accelerated and is significantly above target. Inflation at January 2022 of 9.7 per cent remained above the upper limit of the Bank’s target range and, without policy actions, this breach is projected to persist over the next 10 to 12 months.
- While international commodity and shipping prices had declined in the early half of the December 2021 quarter, there have been some reversals and the impact of past increases has had a stronger than projected pass-through to local prices. The ongoing shock to international commodity prices has also contributed to a further rise in inflation expectations.
- The prospects of earlier and stronger monetary tightening among Jamaica’s major trading partners may precipitate capital outflows and pressures on the exchange rate if domestic monetary policy is not appropriately aligned.
- Underlying demand pressures may also begin to threaten the stability of the foreign exchange market and, with it, diminishing the prospects of inflation returning to the target range.
- In the wake of past monetary policy adjustments, while interest rates in the money markets have increased at a faster pace than Bank of Jamaica’s policy rate, banks remained relatively liquid and, for the most part, have not passed on the policy rate increases to their customers who hold deposits with them. In this context, banks have also only marginally increased loan rates.
The date of the next policy decision announcement is 29 March 2022.
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