BOJ Increases Cash Reserve Requirement to 6% and Maintains Policy Rate at 7%

February 21, 2023

The Bank of Jamaica’s Monetary Policy Committee has decided to increase the domestic and foreign currency Cash Reserve Requirements (CRRs) applicable to deposit-taking institutions (DTIs) by 1 percentage point to underpin the return of inflation to the target range of 4.0 to 6.0 per cent. DTIs are now required to hold a minimum of 6.0% of their Jamaican dollar-denominated prescribed liabilities and 14.0% of their foreign currency-denominated prescribed liabilities as cash reserves at the central bank.

The MPC also decided to maintain the policy interest rate at 7.0 per cent and continue to maintain relative stability in the foreign exchange market. This was due to incoming data being favourable for the inflation outlook, risks to inflation having become elevated, and near-term risks to the inflation outlook being elevated and skewed to the upside.

Jamaica’s economy continues to grow strongly, with GDP for fiscal year 2022/23 projected in the range of 4.0 to 5.5 per cent, exceeding the upper limit of the range previously anticipated by the Bank. The GDP outturn for the September 2022 quarter was higher than anticipated, and there are signs that the economy continued to expand for the December 2022 quarter and for the March 2023 quarter to date.

Future monetary policy decisions aimed at returning inflation to the Bank’s target range, including further adjustments to the cash reserve requirement, will depend on the state of liquidity in the financial system and the continued pass-through effect of monetary policy on deposit and loan rates. The decisions will also depend on the MPC seeing more pass-through of international commodity price reductions to domestic prices and on the Fed continuing to slow its policy rate increases.


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