Bank of Jamaica cuts rates

Bank of Jamaica cut interest rate by 25 basis points effective today April 5 resulting in the rate offered on its 30-day certificate of deposit, the policy rate, falling to 4.75 percent from 5 percent.
The last time the rate was adjusted was in May 2016 when 0.25 percent was cut off the 30-day certificate of deposit. “The rates applicable to the Bank’s overnight lending and deposit facilities that are linked to the policy rate will correspondingly fall by 0.25 percentage points,” the central bank stated.
The decline comes against the back ground of a slight decrease in the 192 Treasury bill rate rate at the March auction and IC Insider forecast that Treasury bill rates should fall towards 4 percent by 2018.
The central bank cited a number of developments that led to the recent cut. The adjustment reflects “the Bank’s assessment that inflation for FY2017/18 will be within BOJ’s inflation target of 4 percent to 6 percent for the fiscal year. This assessment has been reinforced by the Government’s strong commitment to maintaining a 7 percent primary surplus for FY2017/18 and to meet the overall public sector fiscal targets under the precautionary Stand-By Arrangement, as approved by Parliament. The continued tight fiscal policy posture supports an easing in monetary conditions.”
“Jamaica’s main economic indicators continue to improve in the context of a strong reform programme and a favourable external environment. Economic activity continues to expand although at a slower pace than its potential rate of growth. Other key macroeconomic indicators have been reflecting generally positive trends: inflation expectations remain firmly anchored in single digits, international reserves remain strong, the current account of the balance of payments is projected to remain at a sustainable level, private sector credit is expanding strongly and market interest rates have been trending downwards.
The change in rates has implication for investments and is very positive for the stock and real estate markets and should lead to a rise in value around 5 percent as a result. The move should also result in more demand for preference shares on the local market as they become more appealing with their fixed coupon rates and help boost lending at banks and improve their profit.