BOJ Reports Increase In Credit Given By Deposit-Taking Institutions

The Bank of Jamaica (BOJ) is reporting a 15.5 per cent increase in credit extended by deposit-taking institutions (DTIs) to businesses and households for the 12-month period ending September 2019.

Governor, Richard Byles, says this is “broadly consistent” with the level of growth in this area, since the start of the year.

He was speaking at the Central Bank’s quarterly briefing in downtown Kingston, on Thursday (November 21).

“In addition to loans from DTIs, firms have been obtaining financing from the issue of corporate bonds and equity,” he added.

Mr. Byles said the continued buoyant growth in DTI credit results from institutions, such as commercial banks, merchant banks and building societies, reducing lending rates on local currency loans.

This, he added, is consequent on reductions in the BOJ’s policy rate on overnight DTI placements, which have fallen from 3.75 per cent to 0.5 per cent per annum, since June 2017.

Meanwhile, Deputy Governor, Dr. Wayne Robinson, noted that underlying the overall 15.5 per cent increase in credit is a “healthy” 17 per cent growth in loans to the productive sector, year on year.

“We are seeing growth… right across a number of sectors [including] manufacturing, construction, distribution [and] professional services… so it’s quite broad-based,” he added.

On Tuesday (November 19), the BOJ announced its decision to maintain the overnight policy rate unchanged at 0.5 per cent, effective November 20.

“The Bank of Jamaica’s decision… is based on our assessment that monetary conditions are, generally, appropriate to support the achievement of the Bank’s inflation target of four to six per cent over the next eight quarters,” Mr. Byles said.

He said that according to data from the Statistical Institute of Jamaica (STATIN), consumer prices rose by 3.3 per cent for the 12-month period ending October 2019, as against 4.7 per cent for the corresponding period last year.

Mr. Byles noted that the largest contributor to the inflation rate was Food and Non-Alcoholic Beverages, which increased by 5.9 per cent over the period.

This, he pointed out, was driven by a spike of close to 17 per cent in vegetable prices, and a 6.4 per cent increase in the category of Education, reflecting increases in school fees.

The Governor pointed out, however, that there was a one per cent decrease in the category of Housing, Water, Electricity and Gas.

This, he added, was driven mainly by a decline in electricity rates consequent on a fall in the cost of fuel used in power generation, while also pointing out that transport-related expenses fell by 1.9 per cent due to lower oil prices.

Mr. Byles said the BOJ anticipates consumer prices to rise at an average 12-month rate of 4.5 per cent over the next eight quarters.

“This outlook for inflation is based on the Bank’s expectations for the pass-through of Bank of Jamaica’s past monetary accommodation to prices. The impact of this is expected to be partially offset by low global growth and inflation among Jamaica’s main trading partners, declines in international commodity prices as well as continued tight fiscal policy,” he added.