Bank of Jamaica Reduces Policy Rate by 50bps to 6.25%

The Bank of Jamaica reduced its policy rate by a cumulative 50 basis points to 6.25% in the September quarter. The Bank said in it's quarterly report: "The Bank's policy rate, the interest rate payable on 30-day certificates of deposit, was reduced on two occasions by a cumulative 50 basis points. Accordingly, at the end of September the policy rate was 6.25 per cent. The Bank's action was informed by an improved outlook for inflation for the rest of the fiscal year, a protracted period of stability in the exchange rate, adequate net international reserves and weak but improving domestic demand conditions."

Jamaica reported annual inflation of 7.8% in the 2010/11 year (rising slightly to 8.1% in the September quarter), with base money growth at 2.1% and GDP growth at -1.0%. The Bank of Jamaica has an inflation target range of 6-8%, and base money growth target rate of 8.5-9.5%, and GDP growth target of 1-2% for the 2011/12 financial year. In line with the Bank of Jamaica's interest rate reduction, the Development Bank of Jamaica has cut its interest rate to as low as 8.00%. Jamaica's currency, the Jamaican dollar (JMD), has weakened by about 1% against the US dollar so far this year, while the USDJMD exchange rate last traded around 86.05.

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