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BOJ cuts interest rates again

Published:Monday | August 17, 2015 | 7:58 PM

Bank of Jamaica has cut benchmark interest rates by a quarter of a percentage point, its second rate cut in four months.

Effective Tuesday, August 18, the rate on the central bank’s 30-day Certificate of Deposit will be reduced to 5.25 per cent from 5.50 per cent.

The rates applicable to the central bank’s lending facilities “that are linked to this policy rate,” BOJ said, will all be reduced by the same 25 basis points.

The policy adjustment comes days after Minister of Finance Dr Peter Phillips told an economic forum that he expected interest rates to fall, based on prevailing economic conditions.

BOJ said in a release on Monday that its reduction of benchmark rates is backed by strong implementation of economic reforms under the IMF Extended Fund Facility to Jamaica, expectations that fiscal inflation would fall within a range of 5.5 per cent to 7.5 per cent and is projected to decline in the medium term.

“This assessment is supported by continuation of low international oil prices, a post-drought recovery in agriculture output and continued reduction in inflation expectations,” said BOJ.

“In addition, the current account of the balance of payments is improving, net international reserves are rising, the Government’s debt ratios have improved markedly, and the Government has demonstrated commitment to a strong fiscal stance,” the central bank said.

BOJ last reduced interest rates in April, when it also shaved 25 basis points off the 30-day Certificate of Deposit.

Then the central bank’s policy rate adjustment followed reports that inflation had fallen to 4.0 per cent, a 48-year low. Annual inflation has since fallen further to 3.8 per cent as of July.