The Bank of Jamaica (BOJ) has reduced the policy interest rate – the rate offered on overnight placements with the Bank – from 3.25 per cent to 3 per cent effective today, January 18.
The adjustment reflects the Bank’s assessment that inflation for the next eight quarters should remain within the target of 4.0 per cent to 6.0 per cent, but the risks to the projections are skewed to the downside, the BOJ said in a release.
It said that one of the key risks highlighted by recent data is that, even as the economy continues to expand, growth has been weaker than anticipated.
“The outlook for inflation continues to reflect the expectation that the government will continue the high standard of fiscal management outlined in the fiscal rules,” the central bank said.
Inflation picked up slightly in recent months, largely driven by higher agricultural food prices and electricity costs caused by the recent heavy rains and increases in international oil prices, said the release.
However, the inflationary impact of the heavy rains on agricultural food prices should be reversed over the coming quarters, the BOJ added.
The Bank’s decision to ease monetary policy supports continued credit expansion and faster economic growth.
“International reserves are growing, inflation expectations remain broadly anchored around the Bank’s target, the current account of the balance of payments is projected to remain at sustainable levels, market interest rates are declining and the fiscal accounts continue to perform strongly,” the BOJ said.