Effective yesterday, the Bank of Jamaica (BOJ) has further reduced the interest rate offered on overnight placements with the bank by 0.25 per cent per annum.

The policy interest rate reduction from 3.50 per cent per annum to 3.25 per cent, follows on a reduction the country saw in August from 3.75 per cent to 3.50 per cent per annum.

Overnight rate provides for an efficient method for banks to access short-term financing from the central bank. Since the rate is influenced by BOJ, it can be used as a good predictor for the movement of short-term interest rates for consumers in the economy.

The lower the overnight rate, the less expensive it is for the banks to borrow money, and it is expected that the lowered interest rates will be passed on to consumers.

According to the BOJ, the adjustment to the policy rate reflects the bank’s assessment that the inflation outlook for fiscal year 2017/18 and fiscal year 2018/19 will remain within its medium-term inflation target of 4.0 per cent to 6.0 per cent.

It added that the recent appreciation of the exchange rate has attenuated the upside risks to the inflation forecast.

“This outlook is also reinforced by the Government’s commitment to meeting the medium-term fiscal targets outlined in the Fiscal Policy Paper. Jamaica’s key macroeconomic indicators continue to reflect generally positive trends and macroeconomic stability is entrenched,” the central bank said in a press release on Wednesday.

http://www.jamaicaobserver.com/business-report/boj-reduces-interest-rates_117951