The Bank of Jamaica (BOJ) has raised its policy interest rate by 100 basis points to 1.50% as inflation breached the upper limit of the bank’s target range in August. However the action will “moderate” the economy’s growth potential.
The policy interest rate has stood at a historic low of 0.5% since August 2019. Currently inflation is tracking at 6.1%. The inflation target stands between 4 – 6%. Accompanying the policy interest rate increase, the BOJ has also opted to continue implementing measures to contain Jamaican dollar liquidity expansion. “The recent significant increases in international commodity prices and shipping costs have had a stronger than expected pass through to local prices. These increases have contributed to a further rise in inflation expectations, which were already elevated,” the BOJ stated. This in the wake of data indicating 14.2% in the Aril to June quarter. The growth out-turn was the result of increases in both the services and goods-producing industries of 14.8% and 12.7%, respectively. (JG) (Loop)
Extract from CARICOM BUSINESS Newsletter, Vol 4 No 39
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