BOJ cuts interest rates again

The Bank of Jamaica (BOJ) has announced cuts in the interest rates on open market instruments for the fourth time this year.



Open market instruments are investment options sold to by the Government over different period on which an interest is paid upon maturity.



The Central Bank says as of today, the rates will be going down by 200 basis points or 2 percentage points.



However, Financial Analyst Ralston Hyman said the reasons cited for the interest rate cuts are questionable.



According to the BOJ, the benchmark six-month rate has been cut from 17 per cent a year to 15 per cent.



With the across the board 200 percentage-point cut in the rates, the interest payable on 120 day instrument will now be 13.7 per cent.



On the 90 day instrument it will be 13.5 per cent, on the 60 day 11 per cent, and on the 30 day instrument 10 per cent.



The BOJ has cited positive trends in key economic indicators like inflation, the balance of payments and the exchange rate among the reason for the rate cuts.



It says these trends are expected to continue over the medium term.



According to the central bank, this outlook is underscored in the economic programme agreed with the Staff of the International Monetary Fund.



It said the programme is supported by a package of policy measures geared towards fiscal and debt sustainability.



The Central Bank also says these policy measures will lay the foundation for a stable macroeconomic environment and sustained growth.



However, the BOJ concedes that there will be a shock to inflation over the next three months arising from the increased taxes announced yesterday.



However, the BOJ said the shock will only be temporary and the longer term outlook still points to single digit inflation.