The Bank of Jamaica (BOJ) has announced an increase in its interest rate by 0.50 per cent basis points effective Wednesday, November 17, 2021, and follows an increase in October, ending a 13-year streak of holding of cutting interest rates.
In a policy decision announced on Tuesday, November 16, 2021, the rate has moved from 1.50 per cent to 2.00 per cent per annum.
This reduction in the level of monetary accommodation will cause market-based interest rates to rise further. The rate increase will also make a saving in Jamaican dollars more attractive and borrowing in Jamaican dollars more expensive.
Accompanying this rate increase, the Bank decided to maintain other measures to contain Jamaican dollar liquidity expansion.
It says while not targeting any specific level of the exchange rate, the Bank of Jamaica will continue to ensure that movements in the exchange rate do not threaten the inflation target.
In general, monetary policy decisions taken by the Bank of Jamaica are aimed at ensuring that the annual increase in the prices of consumer goods and services remains within the Bank’s inflation target of 4.0 per cent to 6.0 per cent.
Inflation is projected to average 5.5 per cent to 6.5 per cent over the next two years.
The BOJ’s Monetary Policy Committee said it has written to the Ministry of Finance and Public Service to explain the cause of the inflation breach, the measures taken to restore inflation to the target range, and the short-term inflation outlook.
The Central Bank says Inflation will continue to breach the upper limit of the Bank’s target range over the next 10 to 12 months at higher rates than were envisaged in the previous forecast and is projected to peak in the range 8.0 per cent to 9.0 per cent over this period.
The date of the next policy decision announcement is December 20, 2021.