BoJ maintaining policy rates, targeting slightly higher inflation
The Bank of Jamaica (BoJ) says it will keep its policy rates unchanged while targeting slightly higher inflation to spur on the economy.
"Looking further ahead, the BoJ expects that the annual rate of consumer price increase will average about 4.7 per cent over the next eight quarters," Governor Richard Byles said this morning at his quarterly briefing at the Central Bank in downtown Kingston.
The outlook for inflation is based on the stimulating effects of the BoJ’s past monetary accommodation on prices, as well as imported inflation.
This morning the US reported slightly higher than usual inflation blamed in part on that country’s deficit spending which effectively pumps more funds into the economy.
Meanwhile, Wayne Robinson, deputy BoJ governor told The Gleaner that inflation among the island’s major trading partners have inched up from 2.0 per cent to 2.2 per cent.
The BoJ will maintain its policy rate at 0.5 per cent but will closely monitor the impact on credit expansion, capital market transactions, and overall economic activity.
The BoJ said, despite the volatility of the foreign exchange market it believes that the introduction of the FX swap along with the B-FXITT operations, already in place, will seek to "smooth out" excess volatility and "restore orderly conditions in the market", according to Byles.
The BoJ introduced the Foreign Exchange Swap Arrangement on January 21 as a method to provide FX liquidity to banks and cambios at a set price.
Separately, the BOJ intends to introduce its FX platform for banks and cambios later this quarter which would improve transparency in the system.