BOJ maintains 2% policy interest rate
Bank of Jamaica (BOJ) has maintained its policy interest rate, the rate offered on overnight placements with the Central Bank, at 2.00 per cent.
The BOJ says the decision reflects the Bank’s assessment that inflation, currently below target, will rise towards the lower end of the target of 4.0 per cent to 6.0 per cent by the March 2019 quarter and approach the middle of the target range thereafter.
The bank says its outlook for inflation for the remainder of 2018 and the first part of 2019 is largely predicated on an expected increase in agricultural prices, oil prices remaining elevated and higher domestic Gross Domestic Product (GDP) growth.
According to the central bank, the latter is driven in part by the accommodative monetary conditions induced by the BOJ over the past year.
Over the medium term, the bank says its inflation outlook continues to reflect a gradual acceleration in economic activity.
“However, the path for inflation continues to reflect some slack in the economy (i.e, projected GDP growth is less than the Bank’s estimate of potential GDP growth) and therefore the continued risk of inflation falling below the baseline projection.
“The decision to maintain the policy rate, following downward adjustments of 100 basis points earlier this year, is in the context of the signs that have emerged of a pick-up in the rate of expansion in private sector credit. If this acceleration in private sector credit growth continues, the resulting increase in economic activity will support inflation returning to the target of 4.0 per cent to 6.0 per cent with greater certainty,” said the central bank in a statement.
The BOJ says it is closely monitoring these credit conditions and will make further cuts to the policy rate if required.
“Macroeconomic indicators continue to be positive.
“Net international reserves are at healthy levels and the current account of the balance of payments, while projected to widen, will remain at sustainable levels. Market interest rates are also at record lows and employment continues to expand.”