BOJ cuts interest rate for fourth straight time this year

The Bank of Jamaica (BOJ), on Friday, announced its Monetary Policy Committee’s decision to reduce the policy interest rate by 25 basis points (bps) to six per cent per annum, effective Monday, December 23, 2024.

 The lowering of the policy rate represents the fourth consecutive reduction for 2024.

This decision to ease monetary policy is based on inflation becoming anchored in the target range, the BOJ said.

Moreover, despite the impact of recent adverse weather on prices, inflation is expected to remain in the target range.

Annual headline inflation at November 2024, as reported by the Statistical Institute of Jamaica (STATIN), was 4.3 per cent, representing a trend reduction from 7.4 per cent at January 2024.

Core inflation (which excludes the prices of agricultural food products and fuel from the consumer price index (CPI)) was 4.2 per cent at November 2024, representing the seventeenth consecutive month that core inflation fell below six per cent.

Over the next eight quarters, inflation is likely to remain within the bank’s target range. There, however, remains an upside risk to the inflation projection in the context of the uncertainty associated with the potential changes to economic policies among Jamaica’s main trading partners. However, the timing and the extent of the policy changes are still highly uncertain. To this end, the scope for further policy easing will depend on the trajectory of inflation relative to the lower bound of the inflation target range.

However, the MPC noted that interest rates on bank loans, along with other credit terms, remain high and restrictive, indicating that banks may have room to make downward adjustments in those rates.

Despite the positive trends in inflation, the central bank said it recognises that consumer prices in Jamaica are still high. In this context, it remains committed to its primary mandate of maintaining low, stable and predictable inflation.