The Bank of Jamaica (BOJ) has emphasised that while its central mandate remains inflation control through prudent monetary policy, this objective is reinforced by the strength and stability of the country’s financial system.

Senior Deputy Governor, Dr Wayne Robinson, made the statement while addressing the Jamaica Stock Exchange (JSE) Regional Investments and Capital Markets Conference, held recently in Kingston.

“Vulnerabilities or weaknesses in the financial system constrain the degree of freedom that monetary policy has and limit its effectiveness. If you have a banking system whose credit portfolio is under stress, the Central Bank may want to tighten and raise interest rates. But commercial banks will not follow us, because they will be concerned about the quality of their loan books,” he explained.

Dr Robinson noted that the BOJ works to ensure the financial system remains resilient and capable of absorbing economic fluctuations, including the shock caused by Hurricane Melissa.

“That’s why we do constant stress testing of balance sheets of individual institutions and of the system as a whole. [This applies] not only to banks, but we have to do it for securities dealers and insurance companies, as well, to get a sense of their ability to absorb shocks. That is why it is important that we continue to build sufficient buffers in the financial system,” the Senior Deputy Governor noted.

He assured that Jamaica’s financial system is sound and, through regulators working in partnership with financial institutions, has established sufficient capital buffers to ensure entities remain solvent and maintain cash to meet both current and future depositor needs.

“The capital adequacy ratio in the banking sector is about 14 per cent to 15 per cent, well above the benchmark. In the securities dealers’ sector, it’s around 22 per cent…again, significantly above the benchmark,” Dr Robinson pointed out.

He acknowledged that during periods of high inflation, when the BOJ tightened monetary policy by raising its policy interest rate, some financial institutions recorded fair value losses but managed them effectively.

Dr Robinson told conference participants that consistent fiscal policy by the Government also supports the Central Bank’s efforts to control inflation within the target range of four to six per cent.

He noted that successive political administrations have, for many years, pursued disciplined fiscal policies—covering public income, expenditure, and debt management—that reinforce economic stability.

Meanwhile, Dr Robinson described the global changes underway as seismic shifts evident in trade, capital flows, the international financial architecture, and even in population structures and migration patterns.

These changes, he pointed out, are compounded by repeated shocks experienced by Jamaica and other Caribbean countries. Such shocks include frequent natural disasters, such as hurricanes and earthquakes, as well as global health emergencies like the COVID-19 pandemic.

Dr Robinson asserted that, given the rapid pace of global change, central banks are now less certain in projecting future trends.

“The crystal ball is just murky. So we have to move beyond the idea that there is a central tendency and that we really know the future. Instead, we have to be thinking about a range of possibilities, and outcomes and probabilities associated with those. We have to move away from traditional forecasting, to start thinking about scenarios and scenario planning and what our contingencies are,” he stated.