KINGSTON, Jamaica: The JMEA strongly disagrees with the recent decision of the Bank of Jamaica (BOJ) to increase deposit interest rates by 1 percentage point from 0.5% to 1.5%. This decision is misguided. The BOJ has justified the increase in order to dampen further inflation expectations and to stabilize the exchange rate. However, the inflationary increases being experienced by the Country are indicative of global shortages, increased transportation cost and logistic challenges which are on going.
In addition, it has been demonstrated in the past that the devaluation of the Jamaican dollar against international currencies has more to do with foreign currency shortages and the level of confidence in the Government’s economic policies than adjustments in interest rates. In this regard, we support the move to maintain satisfactory international reserves and a stable fiscal policy. The approach of the BOJ is academic and will fail to keep either the exchange rate stable or to moderate the rate of inflation.
The increase in interest rates will debilitate our economy and further impoverish the most vulnerable in our society. A move of this nature by the Central bank will result in higher lending rates to consumers including small manufacturers and exporters affecting their ability to pay their bills and keep staff employed.
The JMEA strongly recommends that the BOJ seriously reconsider this action in the near future.