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The Bank of Jamaica in downtown Kingston, Jamaica (Photo: Jamaica Observer)

Bank of Jamaica holds policy rate as uncertainty prevails

The Bank of Jamaica in downtown Kingston, Jamaica (Photo: Jamaica Observer)

The Bank of Jamaica (BOJ) announced its decision to hold the policy interest rate, stating that the economic outlook for Jamaica remains highly uncertain in the context of the ongoing COVID-19.

The Bank of Jamaica building in downtown Kingston. (File photo)

The policy rate is the rate offered to deposit-taking institutions on overnight placements with the BOJ unchanged at 0.50 per cent per annum.

The central bank, in a release yesterday, June 29, said “The decision to hold the policy rate unchanged is based on the Bank’s continued view that monetary conditions are generally appropriate to support inflation remaining within the target of 4.0 per cent to 6.0 per cent over the next two years.”

Commenting on continued economic uncertainty due to the COVID-19 pandemic, the BOJ said it will continue to assess incoming data and “stands ready to implement other policy measures, if the need arises.”

The BOJ its updated view stems from expectations for higher agriculture prices as well as higher energy and transport costs.

 Annual inflation as at March 2020, was 4.8 per cent, lower than the 6.2 per cent at December 2019 and firmly within the target range, as reported by the Statistical Institute of Jamaica.

Underlying or core inflation, which measures the change in prices excluding agricultural food and fuel prices, remained relatively low at 3.3 per cent.

Jamaica’s forecast was for inflation to average 4.4 per cent over the next two years, at the central bank’s assessment in May 2020.

 The forecast was mainly predicated on the impact of the COVID19 pandemic, which was expected to induce a deceleration in agricultural food prices and a decline in energy and transport-related costs. In addition, the forecast included the impact of administered price increases.

Bank of Jamaica’s current assessment is that inflation will be slightly higher than previously forecast but will track within the target range of 4.0 per cent to 6.0 per cent.

The BOJ said Monday that this updated view of the inflation outlook stems from expectations for higher agriculture prices as well as higher energy and transport costs, compared with the Bank’s earlier forecast.

In addition, upward price pressures could emanate from higher than expected aggregate demand, consistent with an earlier than expected re-opening of the economy as well as a more expansionary fiscal stance.

The BOJ said it remains committed to ensuring that inflation remains low and stable within its target and, at the same time, is prepared to take all necessary actions to ensure that Jamaica’s financial system remains sound. The next policy decision announcement date is August 18, 2020.