BOJ Holds Policy Rate At 0.50 Per Cent On Overnight Placements

Bank of Jamaica (BOJ) Governor, Richard Byles, says the policy rate offered on overnight placements by deposit-taking institutions (DTIs) will remain unchanged at 0.50 per cent.

This comes as the Government leads Jamaica’s response to the coronavirus (COVID-19) pandemic, which has seen the country recording 26 confirmed cases to date.

Addressing journalists during a virtual press conference on Thursday (March 26), Mr. Byles said that the economy could potentially contract by an estimated three per cent, if the domestic and external responses to COVID-19 have to be sustained for most of the 2020/21 fiscal year.

He noted that the outlook is characterised by significant uncertainty relating to the spread of the virus and the consequent depth and duration of the economic impact.

“In the near term, some upward price pressures can be expected due to supply chain disruptions and weather-related increases in agricultural prices. However, these will be offset by a sharp decline in oil prices and weaker consumer spending power, given the expected decline in economic activity,” he said.

In this regard, Mr. Byles said inflation is expected to be at the lower end of the four per cent to six per cent range over the 2020/21 fiscal year, as well as the ensuing eight quarters.

He pointed out that while the outlook reflects significant challenges and heightened uncertainty due to COVID-19, “the Jamaican economy came into this challenging period on a relatively strong footing in the context of our ongoing economic reform programme”.

“I think it is important to emphasise that Jamaica’s financial system remains sound, well capitalised and its current holdings of Jamaica Dollar liquid balances remain adequate,” he noted.

Mr. Byles said that the BOJ’s local and foreign exchange monetary policy measures, along with the Government’s [$25-billion] fiscal stimulus, are aimed at mitigating the pandemic’s impact on the economy “and supporting a speedy recovery, once this crisis has passed”.

He noted that the BOJ will continue to monitor the effect of COVID-19 on the economy “and stands ready to deploy additional measures, including reduction of the policy rate”.

“We need to ensure the continued smooth flow of liquidity to all our participants in the Jamaican financial system and to maintain orderly conditions within the foreign exchange market,” he added.