The move to reduce interest rates follows annualised inflation breaching the central bank’s target range of 4 per cent to six per cent, rising to 6.5 per cent at the end of August 2024.

The Bank of Jamaica (BOJ) has announced the Monetary Policy Committee’s (MPC) decision to reduce the policy interest rate by 25 basis points to 6.50 per cent effective tomorrow, 1 October 2024.

According to the BOJ, “The decision of the MPC to loosen monetary policy further is based on an improvement in the inflation outlook.”

It further explained that the inflation outturn was in line with its projection due to the impact of Hurricane Beryl. However, it anticipates that inflation will return within the target range earlier than initially expected.

One of the factors the BOJ cited for projecting lower inflation rates is falling international commodity prices.

Additionally the bank said, “The lagged effect of the Bank’s monetary policy posture over the past three years should also continue to dampen domestic demand and wage pressures…Inflation expectations in Jamaica have been on a consistent downward path and the exchange rate has been relatively stable. In this regard, inflation is expected to settle within the bank’s target range over the forecast horizon, with the exception of the next two to three months.”

In the meantime, the BOJ said it will continue to manage domestic liquidity and take measures to preserve relative stability in the foreign exchange market.

“The MPC highlighted that the glide path for future interest rate adjustments will be gradual but will continue to depend on the incoming data. The MPC reiterated its commitment to the ongoing review of its monetary policy toolkit to foster improvements in the monetary transmission mechanism,” the bank shared.