BOJ Increases Interest Rates on CDs


Effective today (Dec. 1), the Bank of Jamaica has increased the rates of interest applicable to Certificates of Deposit (CD), in order to dampen high foreign exchange demand and calm the instability in the local financial market.
The new rate are as follows: 30-day up to 17 per cent from 14 pr cent; 60-day is 17.50 per cent up from 14.85 per cent; 90-day rate is 20 per cent up from 15.05 per cent; 120-day rate is 20.20 per cent up from 15.15 per cent; 180-day rate is 21.50 per cent up from 15.35 per cent; and the new 365-day rate is 24 per cent up from 16.70 per cent.
In a statement released today, the Central Bank observed that in recent weeks, developments in external markets have led to a sharp rise in the yields on Government of Jamaica (GOJ) Global Bonds and United States (US) Dollar Bonds issued by Jamaican companies. The Bank further explained that initially, these changes gave rise to increased demand for foreign exchange by securities dealers to meet margin calls from overseas creditors, to which the Bank responded by providing US Dollars to meet the demand pressures.
The statement noted that while foreign exchange inflows to the country continued to be sufficient to meet regular commercial needs, “the increasing attractiveness of these securities has created further demand for foreign exchange by a wider cross-section of persons. This has triggered a disorderly depreciation in the exchange rate, which if allowed to persist, will only precipitate higher inflation and greater macroeconomic instability.”
The Central Bank stated that in addition to these factors, financial institutions hold significant sums in BOJ securities that are due to mature over the next three weeks. “This high level of Jamaica Dollar liquidity in the context of these attractive foreign currency alternatives makes it necessary for BOJ to take this action. This increase in interest rates is designed to dampen the extraordinary demand related to portfolio decisions and thereby restore predictability and order to local financial markets,” the statement said.

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