Jamaica maintains rate as inflation forecast revised up

    Jamaica's central bank keeps its key interest rate steady, saying this reflects its view that inflation is expected to be slightly higher than it forecast in May though still within its target.
    The Bank of Jamaica (BOJ) held its policy interest rate at 0.50 percent, unchanged since it was cut by 25 basis points in August last year.

    BOJ said it now expects inflation to average 4.6 percent over the next 8 quarters, up from the May forecast of an average of 4.4 percent. 

    BOJ targets inflation of 4.0 to 6.0 percent.

    This revised outlook is mainly due to higher agricultural and processed food prices, higher energy costs and an increase in some regulated prices.

     Further details will be released at BOJ's monetary policy briefing on Aug. 26, BOJ said.

     In May BOJ also forecast that Jamaica's gross domestic product would contract by an average 5.1 percent in the current fiscal year, which began April 1, and then recovery in fiscal 2021/22 with growth ranging from 2.5 to 5.5 percent.

     Jamaica's inflation rate jumped to 6.8 percent in June from 5.2 percent in May, GDP shrank by an annual 2.3 percent in the first quarter after zero growth in the previous quarter.

     The Bank of Jamaica issued the following statement:

"Bank of Jamaica announces its decision to hold the policy interest rate (the rate offered to deposit-taking institutions on overnight placements with Bank of Jamaica) unchanged at 0.50 per cent per annum, effective Wednesday, 19 August 2020.

Bank of Jamaica’s monetary policy decisions are aimed at ensuring that the annual increase in the prices of consumer goods and services remains within the 4.0 per cent to 6.0 per cent inflation target set by the Government. The decision to hold the policy rate reflects Bank of Jamaica’s assessment that inflation is projected to average 4.6 per cent over the next eight quarters, slightly higher than the Bank’s previously forecasted average of 4.4 per cent at our last assessment in May 2020. The revised inflation outlook for the next eight quarters is primarily influenced by acceleration in agriculture and processed food price inflation, higher energy costs, as well as increases in some regulated prices.

These and other factors influencing today’s monetary policy decision will be discussed at Bank of Jamaica’s upcoming monetary policy press briefing scheduled for Wednesday, 26 August 2020.

The next policy decision announcement date is 30 September 2020."

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