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  • The Bank of Jamaica (BOJ) has further reduced the policy interest rate on deposit-taking institutions’ overnight placements by 25 basis points to 0.50 per cent, effective Wednesday, August 28.
  • In a statement on Tuesday (August 27), the BOJ said the decision reflects its assessment that inflation is projected to average 4.3 per cent over the next eight quarters, which is within the four to six per cent target range.
  • The Central Bank noted, however, that in the absence of a policy response, inflation is likely to fall below the target’s lower limit “at various points, over the period”.

The Bank of Jamaica (BOJ) has further reduced the policy interest rate on deposit-taking institutions’ overnight placements by 25 basis points to 0.50 per cent, effective Wednesday, August 28.

In a statement on Tuesday (August 27), the BOJ said the decision reflects its assessment that inflation is projected to average 4.3 per cent over the next eight quarters, which is within the four to six per cent target range.

The Central Bank noted, however, that in the absence of a policy response, inflation is likely to fall below the target’s lower limit “at various points, over the period”.

According to the BOJ, over the medium term, the forecast is for inflation to gradually approach the midpoint of the target, “albeit at a slower pace than previously expected”.

“The inflation forecast is mainly predicated on the continued impact of low domestic demand conditions, relative to the economy’s capacity, slower growth among Jamaica’s main trading partners, and decline in international commodity prices. It also accounts for the impact of imminent changes in the fuel mix in the domestic energy sector on electricity rates,” the Bank further stated.

The BOJ pointed out that, similar to previous decisions to reduce interest rates, the latest is intended to stimulate faster expansion in private-sector credit, which is expected to spur higher economic activity, consistent with the inflation target.

This, the Central Bank added, “will support inflation returning more quickly to the centre of the target”.

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