Bank of Jamaica may ease monetary policy in the context of a slower rate of depreciation of the Jamaican dollar, the precipitous fall in oil prices and with inflation expectations fallen sharply.
The bank stated that notwithstanding the sharp fall in inflation, expectations by the business community were above the inflation outturn at end-March 2015, as well as the Bank’s projections for the near-term. The bank went on to state that with the downward adjustment in inflation expectation, in conjunction with favourable developments in the macro financial environment, will allow the Bank to pursue an even more accommodative stance than they have done so far. Notably, developments in the international economy including a faster than projected reversal of oil prices and the timing of tightening of monetary policy in advanced economies will increasingly influence the direction of domestic monetary policy.
“For the March quarter, the Bank’s monetary policy stance remained generally accommodative while being consistent with achieving the monetary targets under the Extended Fund Facility (EFF) supported programme”, the governor reported. In particular, the Bank purchased net amounts of foreign exchange from the market and introduced a 3-month lending facility (Occasional Term Repo Operation), which enhanced liquidity assurance. In the context of the outturns for these
Macro-economic variables and the outlook for inflation over the near-term, the Bank lowered its policy rate by 25 bps to 5.50 per cent on 17 April 2015. This policy action was also consistent with declines in inflation expectations and the country’s risk premium.