BOJ cuts ON rate to 5.50%

February 23, 2026 by
Bank of Jamaica cuts the overnight rate to 5.5 percent from 5.75 percent effective tomorrow, the reduction is the second cut in just under a year. The rate was last cut on 21 May last year, by 25 basis points from 6 percent to 5.75 percent.  

Bank of Jamaica announced that, effective 24 February 2026, the rate offered on overnight balances on the current accounts of deposit-taking institutions, the policy rate, will be reduced by 25 basis points from 5.75 percent per annum to 5.50 per cent per annum. 

In a release by the central bank they stated “in the context of the improved inflation outturn and outlook, the Committee decided unanimously to: (i) reduce the policy rate (the rate offered to deposit-taking institutions (DTIs) on their current account balances at BOJ) by 25 basis points to 5.50 percent per annum, effective 24 February 2026; and (ii) remain proactive in preserving relative stability in the foreign exchange market.”

The inflation forecast takes into account an improved outlook for key domestic macroeconomic indicators. After possible temporary breaches of the upper limit of the inflation target over the June and September 2026 quarters, inflation is now projected to return to the 4 to 6 percent target range by the end of the December 2026 quarter. This earlier-than-previously-anticipated return to target reflects a moderation of the Bank’s forecast for later (or second-round) price increases. In addition, private sector expectations of future inflation (inflation expectations), a key driver of headline inflation, are forecast to fall to normal levels over the near term. The current account of Jamaica’s balance of payments is, however, projected to record higher deficits over the near term as the economy rebuilds from the Hurricane Melissa fallout, but the international reserves remain healthy and are projected to improve further. The forecast also considers the direct impact of the recently announced tax package.

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BOJ’s overnight rate held at 7%

May 20, 2024 by

Following the May meetings that concluded Monday of the Monetary Policy Committee (MPC) Bank of Jamaica held its overnight policy rate at 7 percent, although sighting lower inflation than projected, the rate has been at this level since November 2022, but the bank maybe signalling rate reduction in late summer.
According to the Central Bank Jamaica, the “headline inflation rate at April 2024 was 5.3 percent, which was within the Bank’s target of 4 to 6 percent and 0.3 percentage point lower than the rate recorded at March 2024. It was also lower than the Bank’s most recent forecast, mainly due to a faster-than-projected deceleration in agricultural food inflation. Core inflation (which excludes food and fuel prices from the Consumer Price Index (CPI)) was 5.7 percent in April 2024, marginally lower than the 5.9 percent in March 2024.”
BOJ cautioned that ‘while some key drivers of headline inflation, such as international grain prices and inflation expectations, continued to decline, international oil prices have increased. Inflation in the economies of Jamaica’s main trading partners has continued to moderate albeit at a slower-than-projected pace. The exchange rate has remained generally stable, given Bank of Jamaica’s (BOJ) monetary policy actions as well as strong tourism and remittance inflows.”

Jamaica’s Central Bank

BOJ went to further state, “the moderation in inflation is expected to be interrupted temporarily as inflation is projected to breach the upper end of the target range towards the end of the June 2024 quarter, mainly reflecting seasonally higher agricultural food inflation, a normalisation in electricity rates following significant declines in the same quarter of 2023, as well as higher transport costs due to an uptick in international oil prices. Inflation thereafter is projected to return to the target range and generally remain there over the next eight quarters except for a few months in 2025. The projected breaches in 2025 largely reflect a normalisation of agricultural prices following sharp declines in March 2024, which are not projected to re-occur.”

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BOJ holds policy rate at 7%

May 19, 2023 by

Bank of Jamaica held its policy interest rate at 7 percent, citing concerns that there are likely to be temporary upticks in inflation above the target range during the June and September 2023 quarter, affected by recent increases in the cost of communication services, the national minimum wage, seasonally higher agricultural prices as well as pending increases in other regulated prices.
According to the Central Bank, annual inflation is projected to again be within the Bank’s inflation target range of 4 to 6 percent by the December 2023 quarter, but it noted that both core inflation and the consumer price indices are now within the 4-6 percent band at 5.7 and 5.8 percent up to April this year.
To continue underpinning inflation returning to the target range and to underwrite continued stability in the foreign exchange market, the Monetary Policy Committee (MPC) unanimously agreed to continue to hold the policy rate and maintain tight Jamaican dollar liquidity in the money market and to foster relative stability in the foreign exchange market.

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BOJ CD rate lowest since October

May 3, 2023 by

At the latest auction of the Bank of Jamaica Fixed Rate Certificate of Deposit held on Wednesday the average interest rate declined for a 7th consecutive week after $52.366 billion chased after the $32 billion on offer to yield an average of 8 percent some 24 percent lower than the auction March 15 when rates peaked at 10.54 percent.
Today’s rate is the lowest since October 26 last year with an average of 7.68 percent and seems like a prelude to the central bank cutting the overnight rate this month, with inflation running at the lowest level in more than three years.
The bank received 277 bids of which 214 were successful, with the highest rate submitted being 10.25 percent but the highest successful rate was just under 8.15 percent.
The auction will result in $103 billion due on the 30 days CDS, down from $108 billion last week.

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Government must shake up BOJ

April 19, 2023 by

Inflation has moderated substantially since the sharp spike in 2021 and the Bank of Jamaica has some role in it, with tighter monetary policy, but the price may be much greater than may be visible currently. A look at BOJ reports on inflation since 2021 is very worrying, when compared with the actual outcome, suggesting that the MPC that is guiding the BOJ has done a terrible job in its forecasts. This is a matter the Minister of Finance must carefully look at and so correct what is clearly a major area of concern in managing a very critical part of the country’s economy.
The job of fighting high inflation may be substantially done for this round, how efficiently was it executed is another matter that the country needs to have answered. A careful look at reports emanating from the Bank of Jamaica tells a tale of what looks more like guesswork, than scholarly assessment. Don’t take our word for it, compare BOJ’s utterances since 2021 and their outturn.
Up to April 2021, BOJ fiddled around telling the country that inflation was well under control and that it would remain within the band of 4-6 percent for two years, that’s before they quickly found out that it was not going to be so. Even then rather than acting promptly, they waited until August to announce an increase in the overnight rate, although admittedly they started to pull money out of the market earlier by way of certificate of deposits.
Something must be terribly wrong that within a month of assuring the Minister of Finance that all will be well they had a change of mind. The same thing seems to be happening currently, with inflation set to be within, or very close to the 4-6 percent range in April well ahead of the forecast made by the BOJ at their March meeting when they stated that the target would not be reached until the fourth quarter this year.
The Governor of the Central Bank informed the Ministry of Finance in April 2021, that they could not increase interest rates as that would trim economic growth. But by May 2021, they were singing a different song of higher inflation and forecast for increased rates.
In May, last year they made an erroneous statement that inflation was still moving higher and would increase over the next two months, in fact the underlying data was suggesting that it was improving. Importantly, at their last meeting at which they reviewed the state of inflation they felt so comfortable that things were in line with their forecast that the next meeting was set for May. Had they looked at the real message that had been screaming at them for 2022 and more so since November they would have taken action to reduce overnight interest rates from then.
The MPC release stated, “Annual inflation is projected to continue to fall to the Bank’s inflation target range of 4.0 to 6.0 per cent by the December 2023 quarter. One-off regulated price adjustments may, however, result in a temporary uptick in inflation.”
“Notwithstanding these positive developments, the MPC noted that the risks to the inflation outlook remain elevated. In a context where the domestic economy continues to grow, labour market shortages carry the potential for future wage adjustments that can put upward pressure on inflation. Higher inflation could also result from a worsening in supply chain conditions and higher commodity prices if there are further geo-political disruptions. Among the factors that could lead to lower-than-projected inflation, weaker-than-expected global growth could negatively affect domestic demand, and some projected adjustments to regulated prices may not materialise.”
Therefore, to continue underpinning inflation returning to the target range and to underwrite continued stability in the foreign exchange market, the MPC unanimously agreed to hold the policy interest rate at 7 percent, to maintain tight Jamaican dollar liquidity in the money market and to continue fostering relative stability in the foreign exchange market. The Bank’s liquidity management strategy incorporates the impact of the one percentage point increase in the domestic and the foreign currency Cash Reserve Requirements applicable to DTIs, effective 01 April 2023.”

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BOJ must slash the ON rate to 5% now

April 19, 2023 by

Bank of Jamaica must make a bold move and cut the Overnight rate they charge banks to 5 percent from 7 percent now and prevent driving the economy into recession, with inflation now within the Bank’s target range and set to fall lower over the next few months.
The cut in rates now is also essential to help pension funds and the fall in the value of many of the interest sensitive assets with the financial market that fell had to be marked down to market, with higher interest rates and impaired capital in some of the country’s banks.
Many observers may credit BOJ with managing the inflation in Jamaica well and bringing it back to their target 4-6 percent range. The problem is that the country is now faced with severely undershooting the lower end of the target, a target this publication thinks should be revised down to 2.5 to 4 percent.
In March, ICInsdier.com published an article captioned “Time come for BOJ to cut interest rates”.
We posited that “Interest rates in Jamaica and around the world were pushed up since 2021 to curb inflation that got out of hand, in the process Bank of Jamaica hiked their overnight rate from 0.50 percent August 2021 to a high of 7 percent in November last year, since then point to point inflation peaked in April last year at 11.8 percent, but has since declined sharply by 34 percent to February this year, with the pace since November last year running at 44 percent below the 2021 period.
The average monthly inflation rate has dropped from the 2022 level of 0.6 percent per month from November 2021 to October 2022. It is now running at an average of 0.2 percent per month or 2.4 percent per annum over the last five months, well below the Bank’s target of 4-6 percent per annum. If history is anything to go by, the next three months should see relatively low inflation, suggesting that the current average of 0.2 per month could continue for a few more months. The fall has been consistent, although the rate for a few months exceeded this pace.”
Bank of Jamaica’s target of 4-6 percent is close at hand based on the point to point inflation, with the danger now that the rate could fall well below the lower end of the band if BOJ does not act soon to lower interest rates.
Since then, inflation has remained very low, as we forecasted, with the All-Jamaica Consumer Price Index (CPI) increasing by a mere 0.1 per cent for March 2023.
The big problem is that BOJ MPC members are constantly looking backwards at the point to point inflation and not correctly reading the more critical signals in the data they sent that inflation was killed from 2022.

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Interest rates held at 7% for Jamaica

March 30, 2023 by

Interest rates set by the Bank of Jamaica held at 7 percent for the overnight deposits, even as inflation continues to fall rapidly in the country and now running at an average of 0.20 percent per month or 2.4 percent annualised since November last year. The monetary Policy Committee determined the decision at meetings held this week.  
According to the country’s central bank, “Inflation continued to ease, consistent with Bank of Jamaica’s monetary policy and international developments. Jamaica’s inflation rate to February 2023 of 7.8 percent was below the rate of 8.1 percent at January 2023. The February outturn was the lowest rate since December 2021.”
The key external drivers of headline inflation, such as grains, fuel and shipping prices, continued to decline, broadly in line with the Bank’s expectations. In addition, inflation expectations continued to track.
Core inflation (excluding food and fuel prices from the Consumer Price Index) at February 2023 also decelerated to 6.6 percent from 7.1 percent at January 2023 and is projected to fall further as monetary policy remains tight.
Annual inflation is projected to continue to fall to the Bank’s inflation target range of 4 to 6 percent by the December 2023 quarter. One-off regulated price adjustments may, however, result in a temporary uptick in inflation.
Notwithstanding positive developments in inflation, “the MPC noted that the risks to the inflation outlook remain elevated. In a context where the domestic economy continues to grow, labour market shortages carry the potential for future wage adjustments that can put upward pressure on inflation.

BOJ holds overnight rate.

Higher inflation could also result from a worsening in supply chain conditions and higher commodity prices if there are further geo-political disruptions. Among the factors that could lead to lower-than-projected inflation, weaker-than-expected global growth could negatively affect domestic demand, and some projected adjustments to regulated prices may not materialise.”
“Therefore, to continue underpinning inflation returning to the target range and to underwrite continued stability in the foreign exchange market, the MPC unanimously agreed to hold the policy interest rate at 7 percent, to maintain tight Jamaican dollar liquidity in the money market and to continue fostering relative stability in the foreign exchange market. The Bank’s liquidity management strategy incorporates the impact of the one percentage point increase in the domestic and the foreign currency Cash Reserve Requirements applicable to DTIs, effective the beginning of April 2023.”

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Watch interest rates steer stocks forward

January 7, 2023 by

It does not take much to determine the future of the stock market, the direction of interest rates tells it all, well, almost, but profits cannot be ignored. The accompanying chart suggests that the Bank of Jamaica’s recent hikes in interest rates won’t last much longer, a fact that stock market investors need to ponder early in 2023.
While the Bank of Jamaica only recently pushed their Overnight rate to 7 percent, Interest rates on Treasury bills may have peaked as far back as April 2022, with the 182 days’ Treasury bill rate averaging 8.46 percent in the April auction and moderated slightly downwards since, an indication that the market determined rates were at or close to the peak.
Bank of Jamaica moved their overnight interest rates charged to banks from 0.50 percent in September 2021 to 7 percent in November last year, a measure implemented mainly to tame inflation. Inflation has cooled sharply from the high in 2021 and is on the way down. The foreign exchange market buoyancy resulted in some appreciation of the Jamaican dollar, while the NIR seems to have risen to record levels for an end of year close.
The attached chart shows investors tending to react belatedly in response to interest rate movements. Profit ultimately is the primary long term driver of stock values. If interest rates are falling and so are profits, stock prices are unlikely to increase in the short run, the reverse is true. It is, therefore, not surprising that many companies listed on the Junior Market that enjoyed a substantial increase in profits registered good gains in stock prices in 2022, with seven gaining between 100 percent and 312 percent and 8 gaining 50 to 99 percent even as the Junior Market index rose only 16.3 percent for the year, while 21 Main Market stocks gained between 2 and 82 percent for the year, following a 10.2 percent decline in the JSE Main Index and 8 percent for the All Jamaica Composite Index. In all, 22 stocks gained more than the market average. Although not spectacular, the movement in the market was vastly better than the increase in Treasury bill interest rates, which jumped 89 percent above the 4.33 percent rate at the end of December 2021.
Investors can look forward to a fall in rates in 2023 as inflation moderates substantially and falls within BOJ’s 4-6 percent target during 2023. That development will likely be more impactful for Junior Market stocks that will enjoy a higher profit increase than those in the Main Market.

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BOJ pushes interest rate higher

September 29, 2022 by

Bank of Jamaica which increased the overnight rate over the past year by 550 basis points to 6 percent in August has pushed the rate to 6.5J percent in its latest decision.
According to the Central Bank, while “the key drivers of inflation and other economic indicators are trending in the right direction, conditions have not sufficiently solidified to ensure that inflation is sustainably on a downward path.”
“Bank of Jamaica is also concerned about the slow pace at which interest rates on local currency deposits and loans have responded to its policy signals. In a context where the Bank’s policy rate has increased by 500 basis points (bps) between end-September 2021 and end-July 2022, the weighted average deposit rate offered by deposit-taking institutions to the public has increased by only 37 bps.”
“ In addition, the pace of monetary tightening among Jamaica’s main trading partners has accelerated. On 21 September 2022, the Federal Reserve Board raised its interest rate target by 75 bps, 25 bps more than anticipated by the Bank. The Fed also changed its forward guidance to signal that interest rates could rise to 4.4 percent by end-2022 and to 4.6 percent by end-2023, compared to its previous median projections of 3.4 percent and 3.8 percent, respectively. This more aggressive stance could result in US dollar assets becoming more attractive relative to those denominated in Jamaican dollars, which could cause capital outflows, prompting a faster pace of exchange rate depreciation and, consequently, a derailment of the Bank’s efforts to manage inflation.”

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BOJ hikes interest rate higher to 5.50%

June 29, 2022 by

The Bank of Jamaica hikes its overnight rate once more by 0.50 percent to 5.50 percent following the latest meeting of the Monetary Policy Committee (MPC).
The decision the bank stated was “unanimously agreed to” by MPC who “also decided to continue pursuing other measures to contain Jamaican dollar liquidity expansion and maintain relative stability in the foreign exchange market.”
The Committee noted that “while inflation at May 2022 of 10.9 percent was lower than inflation at April 2022, core inflation remained elevated and headline inflation is likely to continue to breach the Bank’s target range over the next year.”
The MPC noted that its current decision reflects a cumulative increase in the policy rate of 500 bps since October 2021, which has taken the policy rate closer to the level that the Committee considers appropriate. The bank stated that “the measures are also aimed at reducing economic demand and, consequently, the ability of businesses to pass on price increases to consumers. These decisions are also expected to continue to support a relatively more stable foreign exchange market.”

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