BOJ Cuts Policy Rate To 6.5 Per Cent

KINGSTON — The Bank of Jamaica's (BoJ) policy rate, which is the interest rate payable on 30-day certificates of deposit, was reduced by 50 basis points to 6.5 per cent at the end of September.

BoJ Governor, Brian Wynter, in giving a review of the country's monetary performance for the September 2011 quarter at the Bank's Nethersole Place headquarters downtown Kingston on November 9, said the interest rate reduction was informed by an improved outlook for inflation for the rest of the fiscal year, a protracted period of stability in the exchange rate, adequate net international reserves (NIR) and improving domestic demand.

He noted that while there was a "pause in the reduction" of the policy rate during the June quarter, due to the volatility in the prices of international commodities, prices generally declined during the September quarter and the outlook is for slower rates of increase for the rest of the fiscal year.

"In particular, the average price of crude oil declined by 12.5 per cent for the September quarter, more sharply than we had anticipated, and is expected to increase at a slower pace than previously projected for the fiscal year," he informed.

Mr. Wynter said that headline inflation was 2.1 per cent for the September 2011 quarter, which is within the Bank's forecast range of 1.5 per cent to 2.5 per cent, and the outturn compares favourably with the 5-year average of 3.8 per cent for September quarters. 

"In addition, at the end of September, the 12-month point-to-point inflation rate was 8.1 per cent relative to 11.3 per cent a year earlier.  Similarly, at the end of September, all the Bank's annual measures of core inflation were markedly below the rates at the corresponding period a year ago,” he declared.

Mr. Wynter attributed the moderation of inflation in the review quarter largely to "seasonal increases in the prices of domestic agriculture commodities as well as higher costs for educational items and tuition."

He observed that the impact of these factors was moderated by continued weak but improving domestic demand conditions, a reversal in the prices of international commodities and the extended period of relative stability in the exchange rate, which depreciated by a negligible 0.06 per cent between the end of September 2010 and the end of September 2011. 

CONTACT: ALLAN BROOKS