BOJ paying 4 times July rates

It now costs the Bank of Jamaica nearly four times as much to manage the financial market as it did in July this year. After a long period of easy money, the country’s central bank recently announced that they were about to end the easy money policy in light of increasing inflation.
The most recent offer of CDs on Wednesday, September 22, fetched an average interest rate of 2.15 percent, with the highest rate of a successful bid being 2.99 percent and the lowest 1.75 percent. These rates are up from the previous auction, earlier in the month.
The outstanding number of CDs sits at $44 billion, up from $40 billion at the end of the month and $35 billion at the beginning of August. This week’s issue attracted 43 bids amounting to $14.77 billion for the total of $11.5 billion offer for the 30 days instrument. Only 29 submissions were successful.
On September 1st, an offer of $9 billion attracted 40 bids amounting to $14 billion. Only 18 were successful, resulting in an average rate of $1.51 percent, with the lowest bid coming in at 0.50 percent and the highest at 4.25 percent. The highest successful bid got 2 percent.
At the beginning of August, when the total amount of CDs was $35 billion, BOJ offered just $8 billion into the market and resulted in bids of $20.22 billion and resulted in an average interest rate of 0.59 percent, with the highest successful bid ending with a yield of just 0.62 percent, just higher than the banks overnight rate of 0.50 percent.
If the higher rates hold well into next year and beyond, there will be winners and losers. Banks with short term interest bearing instruments will enjoy a rise in revenues and on loans. Those with long data instruments will see capital losses unless their investment portfolio is balanced. Savers should see some increase in their interest income while borrowers will face increased interest costs. The move is likely to result in more appreciation of the Jamaican Dollar up to a certain level.