Governor of BoJ Dismisses Claim

Governor of the Bank of Jamaica (BoJ), Brian Wynter, has dismissed the claim that the Central Bank is devaluing the Jamaican dollar, as part of plans to increase the inflation rate.

“It is absolutely not true and it takes you down a wrong path if you believe that’s what we are actually doing. We are not doing that,” Mr. Wynter emphasised.

He was speaking at a press briefing on August 22, where official correspondence from the BoJ outlining the factors resulting in Jamaica’s inflation target shortfall as at June 2018 were released.

The press briefing was held at the Ministry of Finance and the Public Service Heroes Circle offices.

In September 2017, the Government set a medium term inflation target of 4.0 to 6.0 per cent, to be achieved and maintained by the BoJ from April 2018 onwards.

However, between April and June 2018, the 12-month rate fell below the lower 4.0 per cent band.

It is against this background that the BoJ was required to explain the reasons for the deviation to the Finance Minister and nation, and outline the actions being taken to rectify the anomaly.

Mr. Wynter noted that what the BoJ is trying to achieve, using monetary policy, is by lowering interest rates and making the cost of getting credit lower.

“We want to make credit easier to get, so that people borrow more. When people, companies and individuals borrow more, they borrow to invest in activities, whether it is to buy houses or raw materials or to install a new bottling line in their factory,” he said.

The Governor noted that the “act of more borrowing” leads to greater economic activity, which leads to growth and job creation.

“It’s not our job to create growth. Monetary policy right now, loose as it is, may not be loose enough. Interest rates now for medium-sized and small businesses are very high; it is an obstacle to those businesses to be able to expand. They may have good business ideas and products and opportunities, but for one or two per cent reduction of their rate, they are not able to access it,” Mr. Wynter said.

“We want to cause that to happen. So, we use monetary policy to try to get the banking system and other stakeholders to lower their interest rates, creating easier access to credit. That creates more activity and that greater activity comes with more inflation,” he added.

While the BoJ projects that inflation for the September and December 2018 quarters will remain close to 3.5 per cent (just below the target’s lower limit and band limit of the Monetary Policy Consultation Clause), inflation will rise to the initial target’s midpoint by June 2019, and should remain at that level over the medium term.