May 22, 2023
The Monetary Policy Committee (MPC) of the Bank of Jamaica (BOJ) unanimously decided to keep the policy interest rate at 7% despite the continued downturn of headline inflation, which was 5.8% at April 2023. This should maintain tight Jamaican dollar liquidity and preserve relative stability in the foreign exchange market.
The MPC’s decision was influenced by its assessment that incoming data were generally favourable, however, inflation is expected to rise briefly above the Bank’s target during the June and September 2023 quarters. The primary external sources of headline inflation, such as grains, fuel, and shipping prices, have continued to fall largely in line with the Bank’s projections, and inflation expectations continued downward. Core inflation has also slowed to 5.7% in April, relative to 8.4% in April 2022.
Interest rates have generally risen in line with the policy rate in the domestic money and capital markets and the term rates offered by deposit-taking institutions (DTIs). However, slight changes continued to be made to saving deposits and lending rates in the DTI sector.
The probability that Gross Domestic Product (GDP) will grow by 4.0% – 5.5% for the fiscal year 2022/23 remains high as economic grow persists. For the quarter ending June 2023, the economy continued to expand, and GDP is expected to grow between 1.0% and 3.0% for FY2023/24.
Future monetary policy decisions aimed at returning inflation to the Bank’s target range will depend on the incoming data. BOJ will continue to closely monitor the global and domestic economic environments for potential threats to Jamaica’s inflation target.
The pace of monetary tightening by the US Federal Reserve Board (Fed) also slowed as expected, and recent developments suggest that interest rates in that economy may be near or at their peak.
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