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JIS News

The Bank of Jamaica (BOJ) has announced that effective today (June 4), the interest rate payable on the bank’s 30-day Certificates of Deposit will be reduced by 50 basis points, that is, from 10.00 per cent to 9.50 per cent.
A basis point (bp) is a unit relating to interest rates that is equal to 1/100th of a percentage point per annum. It is frequently, but not exclusively, used to express differences in interest rates of less than 1 per cent per annum. It is common practice in the financial industry to use basis points to denote a rate change in a financial instrument, or the difference (spread) between two interest rates, including the yields of fixed income securities.
The BOJ explained that inflationary impulses, particularly those related to recent tax measures, have abated, while the prices of key imported commodities, especially oil, have also moderated. “These developments are moving the likely out-turn for inflation in FY 2010/11 towards the lower end of the forecast range of 7.5 per cent to 9.5 per cent,” the BOJ said.
Meanwhile, secondary trading of securities as well as successive auctions of Treasury Bills indicate an endorsement by the market of the new interest rate norm. Treasury Bill yields have fallen below 10.00 per cent.
“Entrenchment of the lower interest rate structure has been supported by the appreciation of the exchange rate and the reduction of sovereign credit risk as reflected in falling yields on internationally traded GOJ bonds,” the Central Bank noted.
Despite the interruption to economic activity in the Kingston Metropolitan Area during the week of May 24, the Bank’s assessment of the outlook for growth in FY2010/11 remains largely unchanged. While the bank anticipates some fall-out in tourism-related earnings in the short run, it expects that the prospective re-opening of a major alumina processing plant in June and the maintenance of business activity throughout most of Jamaica will contribute to a modest recovery in Gross Domestic Product (GDP) growth in this fiscal year.
The Bank also believes that the on-going reforms embedded in the Government’s economic programme will lead to a lasting improvement in public finances and debt management and will create a basis for longer term financial stability.