The Bank of Jamaica (BoJ)

Review of Economic Performance

July – September 2017

For the review period July – to September 2017, the Bank of Jamaica (BOJ) indicated that, “due to no small part to the successful implementation of the strenuous economic reforms of the recent years, Jamaica has transitioned to a modern competitive foreign exchange market and is now successfully in train. The Governor of the Bank of Jamaica, Brian Wynter, emphases that the two elements that are important in understand this new phase are the fundamental changes that have occurred in market behavior and the change that the Bank made in how it interacts with the market.

According to Mr. Wynter the FX market has moved away from being a market where the exchange rate constantly drifts upward to a more normal two-way market. The Governor indicated, “the Jamaican Dollar (JMD) has appreciated on 127 different days since the start of 2017, while only depreciating on 98 days. This contrasts with 2016 when the dollar depreciated on 174 days and appreciated on only 51 days. For the 12 months to 23 November 2017 the JMD appreciated by 1.9%, compared to a depreciation of 7.7% over the same period of the previous year.”

The Governor also drew attention to Jamaica’s current account of the balance of payments less imports already paid for by foreign direct investment, which has been in surplus for the past two fiscal years; the bank also forecasts for this trend to continue into the medium term. Through the introduction of the Bank of Jamaica’s Foreign Exchange Intervention and Trading Tool (B-FXITT) in July, the bank has reformed the way it interacts with the market. The bank has been able to reduce its footprint in the FX market and intends to continue that trend, subject to market conditions.

Moving on to inflation targets, Mr. Wynter noted that, “the significance of the approval granted by the Minister of Finance for the first time for a medium inflation target for the Bank of Jamaica; the target is 4.0) to 6.0%. “The medium-term inflation target is also more clearly harmonized with the projected outcomes of fiscal policy set out in the Government of Jamaica Policy Paper,” according to Mr. Wynter. The target was selected on the basis of the country’s current prospective economic circumstances. Under the inflation targeting regime, the bank makes adjustments to monetary policy on the basis of its medium-term inflation forecast, the forecast is updated quarterly and is routinely shared with the public.

Turning to other economic developments Mr. Wynter stated he was, “encouraged by the employment results in STATIN’S October release which tell and important positive story.” However, Mr. Wynter cautioned that, “Jamaica is beginning to approach its capacity limits in terms of skilled labour, therefore it is becoming critical for the country to increase the pool of skilled workers in order to facilitate sustained economic growth.”

In closing, Mr. Wynter pointed to the improving economy where macroeconomic stability as a foundation of growth appears to be entrenched.