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<figure class="wp-block-image"><img src="https://buzz-caribbean.com/app/uploads/2019/08/Richard-Byles-Image-2-1024x683.jpg" alt="" class="wp-image-6534" /><figcaption>Governor of the Bank of Jamaica, Richard Byles, earlier today at the Quarterly Monetary Policy Report press conference at Nethersole Place, downtown Kingston</figcaption></figure>
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<p>Earlier this week, the Governor of the Bank of Jamaica ( BOJ) Richard Byles announced the decision to lower the policy rate ( the rate offered on overnight placements with BOJ) by 25 basis points to 0.50 per cent per annum effective 28 August 2019.</p>
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<p>Speaking at his first Quarterly Monetary Policy Report press conference held at the BOJ’s downtown Kingston headquarters today, Governor Byles explained the rationale behind his decision.</p>
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<p>He explained that the decision to cut rates further reflects the BOJ’s assessment that in the absence of additional monetary policy action, inflation is expected to fall below the lower limit of the inflation target of 4.0 per cent to 6.0 per cent at various points over the next eight quarters.</p>
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<p>“BOJ’s decision to lower the policy rate is therefore solely intended, as usual, to stimulate a faster pace of expansion in private sector credit, which will fuel increased economic activity on the part of businesses and households. This increased economic activity by businesses and households will be accompanied by price pressures and, in that way, the rate cut will support inflation returning to the centre of the target more quickly.”</p>
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<p>The Governor pointed out that credit extended by commercial banks, merchant banks and building societies to private sector businesses and households grew by 16.8 per cent over the 12 months to June 2019, which was above the 12.3 per cent growth experienced a year earlier at June 2018.</p>
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<p>However while he sees this as encouraging, he noted it is still not fast enough.</p>
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<p>Turning his attention to inflation, he declared that there are four main factors that inform the BOJ’s inflation outlook:</p>
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<ol><li>Low domestic demand</li><li>Slower growth and lower inflation among Jamaica’s main trading partners</li><li>Decline in crude oil prices</li><li>The impact of change in the fuel mix used in generating electricity.</li></ol>
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<p>As it currently stands, inflation is rising and the Jamaican dollar is depreciating. In STATIN’s latest release, annual headline inflation at July 2019 was 4.3 per cent, up from 4.2 per cent at June 2019 and 3.2 per cent at July 2018. Governor Byles said this was due in the main to increases in the prices of agricultural food items as well as an increase in electricity rates.</p>
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<p>“BOJ’s view is that the prospects for the Jamaican economy remain positive, even though headwinds are on the horizon. Foreign reserves are at adequate levels and we have a sustainable position in the current account of the balance of payments.</p>
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<p>“The fiscal performance is strong and public sector debt continues to decline at a steady pace. Market interest rates remain generally low. However, the domestic economy continues to operate below its potential. In this context we believe that there is room to accommodate a faster pace of growth in economic activity without compromising the inflation target. In this context, BOJ will maintain an accommodative monetary stance to support a faster return of inflation to the centre of the target,” said the Governor of the Bank of Jamaica, Richard Byles.</p>
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<p></p>
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