The Bank of Jamaica’s (BOJ) recent decision to again raise its policy rate in an effort to put a brake on rising inflation is the subject of much debate with the BOJ Governor Richard Byles coming in for much criticism.

Speaking at a GraceKennedy Investor Briefing yesterday, Group CEO Don Wehby said he agreed with the action taken by the Governor to address the pace of inflation.

Responding to a penned question on whether Grace will now be increasing its interest rates across its financial sector businesses, he said: “Yes. I don’t think we have a choice if the Governor of the Central Bank says the policy rate  has to be increased. I agree with Richard Byles when he says it is better to be proactive in terms of interest rate movement. It is a hard pill to swallow but when you look at inflation – and it’s not just Jamaica – when you see what is happening in the US with gas and food prices, it is frightening. If the policy rate moves  to three or four per cent, then margin management is necessary not only with our food business.

“When you are in the banking or spread business, you can’t do it at a loss so you have to manage it very carefully. I’m hoping for both ourselves and the country’s sake, we don’t get to three or four per cent.”

OUTLOOK FOR INFLATION REMAINS CAUSE FOR CONCERN

Last week, Byles, speaking at a Monetary Policy Committee (MPC) press briefing, said: “The outlook for inflation remains a cause for concern. Since the previous meeting of the MPC when the policy rate was increased by 100 basis points to 1.5 per cent and other supporting measures were implemented, we have seen Jamaica dollar liquidity tighten, market interest rate rise and lending rates have either increased at the margin or banks are planning to increase them.

“However, inflation expectations as measured by our surveys remain elevated and of concern. The MPC met last week and voted to increase the policy rate by 50 basis points to two per cent. The MPC agreed to consider further increases of the BOJ’s policy rate and to maintain or intensify the accompanying measures at subsequent policy meetings until inflation expectations are reduced and consequently the inflation outlook is solidly within the BOJ’s target range (four to six per cent).

“This measured approach to monetary policy adjustments is consistent with international best practices and is designed to ensure in the context of the recovering economy, the BOJ deploys the least possible disruptive policy adjustment to achieve its objective.”

Returning to the BOJ digging into its tool bag to contain rapid inflation, the GraceKennedy boss was supportive.

“With the BOJ being proactive, I think it will have inflation under control as best as possible. Remember, these inflationary pressures are outside our control,” Wehby said.

“A lot of it is imported inflation which you can’t do a lot about. It is worse if the dollar devalues because you get yourself into a cycle which sees you importing at a higher rate and with the dollar devaluing, Jamaican consumers are going to feel it. So it is a balancing act and we have to listen to the professionals and the BOJ. They are making the right move at this time.

“It has to be monitored very carefully. If interest rates go up, it is going to affect production and capital investments so we have to watch it carefully. I am very concerned about global inflation.”