June 29, 2022
Effective 30 June 2022, the Bank of Jamaica (BOJ) will increase the policy interest rate (the rate offered to deposit-taking institutions on overnight placements with BOJ) by 50 basis points to 5.50% per annum. The Bank also resolved to continue exploring additional steps to restrain the Jamaican dollar’s liquidity expansion and preserve the foreign exchange market’s relative stability.
As a result of the MPC’s previous monetary policy adjustments, interest rates on new bank deposits and loans in Jamaica have begun to climb and the exchange rate has been more stable than in the recent past.
The current decision of the Bank will lead liquidity conditions to stay tight and interest rates on bank deposits and loans to climb further, making Jamaican dollar savings more appealing relative to foreign currency assets and Jamaican dollar borrowing more expensive. In addition, the tightening of monetary policy will generally lower economic demand and, as a result, the capacity of businesses to pass on price increases to consumers. It is also anticipated that these actions will continue to maintain the stability of the foreign exchange market, bolstered by the Bank’s substantial overseas reserves. At 27 June 2022, Jamaica’s gross reserves totaled $4.4 billion, which represented roughly 129% of the IMF’s expected Assessing Reserve Adequacy (ARA) for FY2022/23.
In an environment of high uncertainty, policy decisions are being taken, and future decisions will be contingent on incoming facts materializing as anticipated.
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