The Bank of Jamaica’s Hike in Interest Rates

In a reaction to the Bank of Jamaica’s decision to increase the interest rate to 1 percentage point from 0.5% to 1.5, Economist, Ralston Hyman says this is a bad decision and believes Governor Byles and the entire policy team should be fired. He noted that the Jamaican economy presently still has a passive output gap; which means the difference between where the country was in the second-quarter of 2019 which was a $196 billion and has dropped 18.4% to $161 billion in the second-quarter of 2020 and rebounded to $183 billion in the second-quarter of 2021. Adding that the country is now $13 billion below where it was in 2019. Hyman noted that the inflation that the country is now seeing is transitory.

In his reaction, Mr. John Mahfood noted many business persons have been complimentary about the stability of the financial sector for the past eight or nine years, both in the Government’s actions of having surpluses and the Bank of Jamaica’s decision to reduce the interest rate. He added that this created an environment that was good for business, however with the onset of the COVID-19 pandemic much of this effort have been negatively affected.

Jamaica Manufacturers and Exporters Association, (JMEA) President, John Mahfood and Economist, Ralston Hyman, joined the CVM Live Panel Discussion to give their reaction to the CVM Live interview, with Bank of Jamaica’s Governor Richard Byles on the Central Bank’s fiscal policy.