Central bank chief promises to wrestle inflation lower
Published:Friday | January 21, 2011 | 12:00 AM
Brian Wynter, governor of the Bank of Jamaica (BOJ), remains committed to holding a tight grip on monetary policy and bringing down interests rate even further, in the lead-up to the crafting of the next budget, he said Wednesday.
"What we are seeing is a process of normalisation and there are more gains to be made," said Wynter, at a briefing of journalists and financial analysts.
The BOJ 30-day certificate of deposit is now at 7.50 per cent. Wednesday's monthly Treasury-bill auction on the 28-day instrument bought a lower yield of 7.46 per cent, though the reduction was only two basis points.
The Jamaica Debt Exchange which has given momentum to falling rates, having cut debt servicing on domestic bonds to an average of 12.25 per cent, is expected to save the country about J$40 million per year.
With Jamaica's national debt still spiralling upwards, a big chunk of which is accounted for in interest costs, the lowering of rates has become a central theme of the Golding administration.
But the BOJ's aggressive stance on cutting policy rates has not translated into similar adjustments in the cost of credit in the banking sector, where calls for faster cuts from businesses and the finance ministry have been spurned.
Wynter said he would continue to focus on maintaining stability in the monetary system so as to quickly drive down inflation.
"It cannot stay where it is, it must come down," he said.
"While there are aspects not subject to our policy management, these are all areas which we are watching very carefully," said Wynter, whose responsibility is core inflation.
Headline inflation is subject to the vagaries of food and oil prices, both of which are on the uptick on world commodity markets.
Nonetheless, Wynter said he expects inflation for the fiscal year to end well within the projected range of 7.5 and 9.5 per cent.
Fiscal inflation at December was 7.3 per cent.
For the next fiscal year, 2011-12, inflation is projected at 7 per cent; dropping to 6 per cent by 2012-13.
Although still cautious, the governor is upbeat that performance has been better than expected over the last year.
He alluded to a fairly stable financial sector, with none of the institutions having to access the financial sector support fund, a US$950-million contingency fund that was part of the programme under the International Monetary Fund borrowing agreement.
With no threat of capital flight, the fund will now be incorporated into the country's gross reserves for balance of payment support.
The ongoing legislative reform to strengthen regulations in the system is also counted as a plus, but still with the challenge of delays in implementation, the BOJ governor said.