Tue | Aug 9, 2022

MPs to comb through BOJ monetary policy statement

Published:Tuesday | July 5, 2022 | 12:11 AM

Members of the Standing Finance Committee of Parliament, comprising all members of parliament, will today meet to review the monetary policy statement covering the second half of 2021, as well as the Bank of Jamaica’s (BOJ) quarterly monetary policy reports for November last year and February 2022.

The review comes at a time when business leaders have expressed strong disapproval of the central bank’s continued adjustments of its policy interest rate: the rate offered to deposit-taking institutions on overnight placements with the BOJ.

The bank’s latest increase took place last week when it adjusted its rates by 50 basis points to 5.50 per cent per annum, effective June 30.

The Jamaica Manufacturers and Exporters Association (JMEA) has raised objections to the BOJ’s moves, warning that interest-rate increases would trigger price hikes for basic food items and, ultimately, risk an economic recession.

The latest increase by the BOJ brings to seven the number of adjustments by the monetary policy authority in months as it seeks to rein in inflation, which was 11.8 per cent as at April 2022. The BOJ’s target range is 4-6 per cent.

President of the JMEA, John Mahfood, wants lawmakers to quiz BOJ officials on the latest developments.

“In view of the fact that the Jamaican inflation is being caused by major events outside of Jamaica and not by internal events, how does increasing interest rates really bring inflation down?”

That is one of the questions that Mahfood wants lawmakers to ask central bank officials.

He is also seeking to determine why the central bank moved to increase interest rates again when there was evidence that the inflation rate was declining.

“They could have waited a month to see if, in fact, inflation is coming down,” he said.

In its quarterly monetary policy report in February 2022, the BOJ reported that domestic inflation was projected to remain above the bank’s target range over the next 10 to12 months, and is projected to peak in the range 9.0 per cent to 11.0 per cent over this period.