Govt. Acts to Maintain Financial Stability

The Bank of Jamaica has announced that effective immediately, interest rates payable on Bank of Jamaica (BoJ) Certificates of Deposit has been increased. The rates that will apply to placements for tenors ranging from 30 days to 365 days are:
Tenor 30 day 60-day 90-day 120-day 180-day 365-dayNew rates 14.65 14.85 15.05 15.15 15.35 16.70Previous rates 14.00 14.20 14.40 14.50 14.70 15.50
According to a release from the BoJ, the adjustment will bring rates offered by the Central Bank in line with yields applicable to Government of Jamaica Treasury Bills and other short-dated market instruments.
“While the outlook for inflation has improved, the recent increase in demand for foreign exchange to pay down foreign liabilities has led the Bank to reassess and to harmonise the structure of interest rates payable on its instruments. In addition, as previously announced, a facility has been established to supply US dollar liquidity to assist financial institutions to satisfy the increased payments to overseas creditors. Taken together, these policy changes will address the temporary gap in the foreign exchange flows and maintain order in domestic financial markets,” the release states.
Earlier, the BoJ took the decision to offer a temporary lending facility to domestic financial institutions as one of the first outcomes of the special team established by Prime Minister Bruce Golding, to monitor the global financial crisis and its immediate and longer-term implications for the Jamaican economy.
The team, comprising representatives of Jamaica’s main monetary and fiscal authorities, met twice during the week, the first chaired by the Prime Minister on Monday (October 13), while Wednesday’s (October 15) meeting was chaired by Finance and Public Service Minister, Audley Shaw.
Technical Advisor to the Finance Minister, Sidjae Robinson, informed JIS News that the meetings reflect the serious attention the international developments warrant and “the preparedness of the Government and monetary authorities to take appropriate action in protection of the national interest and be proactive in preventing or mitigating any negative fall-out.”
The Central Bank’s mid-week intervention was a pre-emptive measure and according to a release from the bank, was “as a direct consequence of the current global financial turmoil, and to preserve overall financial stability.”
“This facility is strictly intended to provide liquidity to these institutions for overseas margin and repo payments on Government of Jamaica (GoJ) global bonds during this period of dysfunctional money markets,” the release added.
The specific objectives of the temporary lending facility are: to alleviate any short-term US dollar liquidity needs of domestic financial institutions; to ensure the stability of GoJ global bond prices; and to minimise pressure in the domestic foreign exchange market.
The BoJ release emphasised that the Central Bank would continue to closely monitor the financial system and take appropriate action.
“In support of the Special Committee’s scrutiny, analysis and weekly Cabinet briefings on the developing situation, a technical team has been established to monitor continuously.on an hourly and daily basis, developments in the local and international money markets,” Miss Robinson pointed out.