Sun | Aug 14, 2022

Lawmakers to review BOJ's interest rate hikes amid cries from businesses

Published:Tuesday | July 5, 2022 | 6:50 AM

Lawmakers will today meet to review the Bank of Jamaica's (BOJ) monetary policy statements amid concerns among businesses about the increases in interest rates and rising prices of goods and services. 

The review will cover the second half of 2021 and quarterly monetary policy reports for November 2021 and February 2022.

BOJ officials will appear before Parliament's Standing Finance Committee, which comprises all members of the House of Representatives. 

The meeting is scheduled for 10 a.m. 

Under the BOJ Act, lawmakers have the power to summon the BOJ governor to discuss the bank's monetary policy and its performance in meeting its inflation target. 

BOJ Governor Richard Byles chairs the five-member Monetary Policy Committee. 

The other members are: Wayne Robinson, senior deputy governor; Robert Stennett, deputy governor; Dr Nadine McLoud, economist and university lecturer and David Marston, a retired chief risk officer of the International Monetary Fund.

Changes to the law in 2020 give the central bank full independence to craft policy, based on its priorities for Jamaica's monetary system.

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.

That decision 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.

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.

President of the JMEA, John Mahfood, wants lawmakers to quiz BOJ officials on why the insistence on increasing interest rates given the effect on home and commercial mortgage rates.

“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?”

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, 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.

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