Announces decision to hold the policy interest unchanged at 0.50% per annum

The Bank of Jamaica (BOJ) has signaled that it will be tightening its monetary policy, as a means of reigning in inflationary expectation.

However, the Central Bank announced yesterday its decision to hold the policy interest rate unchanged at 0.50 per cent per annum for this month. The policy interest rate is the rate offered to deposit-taking institutions on overnight placements with BOJ.

The BOJ says it decision to consider tightening its monetary policy at the next meeting of its Monetary Policy Committee (MPC) in September 2021 and to immediately implement other measures are aimed at moderating inflation expectations. These include the containment of Jamaican dollar liquidity expansion.

Ensuring that the exchange rate do not threaten BOJ’s inflation target

While the BOJ does not target any specific level of the exchange rate, the bank in a statement released yesterday, said it will also seek to ensure that movements in the exchange rate do not threaten the inflation target. Monetary policy decisions taken by BOJ are aimed at ensuring that the annual increase in the prices of consumer goods and services (i.e. inflation) remains within the Bank’s inflation target of 4.0 per cent to 6.0 per cent.

These decisions were made by a unanimous vote by the MPC. The decisions were based on the MPC’s assessment that while inflation is likely to breach the upper bound of the BOJ’s target range over the next year, inflation will gradually decelerate thereafter, as the transitory effects of the pandemic fade.

The upper bound breach could start as early as the September 2021 quarter. The BOJ reports that, “conditional on the gradual tightening of monetary accommodation, inflation is projected to remain at 5.0 per cent over the medium term”.

A summary of the discussions influencing today’s monetary policy decision has been published on the BOJ’s and will be discussed at the bank’s monetary policy press briefing, scheduled for today.

The next policy decision announcement date is September 30, 2021.