BOJ Increases Cash Reserve Requirement, Maintains Policy Rate

Despite a positive outlook for the country’s inflation, the Central Bank Governor is reporting elevated risks. As part of mechanisms to keep inflation in line with the four to 6 per cent targeted, the bank’s Monetary Policy Committee has decided to increase the domestic and foreign cash reserve requirements to deposit-taking institutions come April 1, while maintaining its 7 per cent policy interest rate.

The decisions were informed by the MPC’s view that, while incoming data were generally favourable for the inflation outlook, risks to inflation had become elevated. Jamaica’s inflation rate of 8.1 per cent at January 2023 was below the rate of 9.4 per cent at December 2022. The pace of monetary tightening by the United States (US) federal reserve board (fed) also appeared to be slowing, with future rate increases by the fed projected to be moderate.

He notes on the downside in the context of these risks, the committee concluded that to further underpin inflation returning to the target range and to underwrite continued stability in the foreign exchange market, the additional precautionary liquidity control measure of increasing the Cash Reserve Ratio (CRR) was required. Watch the report: