BANK of Jamaica Governor Bryan Wynter yesterday confirmed the bank’s decision to hold the policy interest rate at two per cent, despite concerns about low inflation.

Wynter told a BOJ press briefing yesterday that the decision reflects the central bank’s updated assessment that inflation, which is currently below target, will rise towards the floor of the four to to six per cent inflation target range by the March, 2019 quarter of 2018/19, and approach the middle of that range thereafter.

However, Wynter noted that the path for inflation continues to reflect some slack in the economy, which underscores the continued elevated risk of inflation falling below the baseline projection.

“The decision to maintain the policy rate, following cumulative downward adjustments of 100 basis points since the start of the year, has been made in the context of signs that have emerged of a pickup in the rate of expansion in private sector credit,” he explained.

Last week, Wynter told a similar briefing called by Minister of Finance and the Public Sector Dr Nigel Clarke at his Heroes Circle-based ministry that the lower inflation out-turn as at June, primarily reflected the impact of a stronger-than-anticipated reversals in agricultural prices in the March 2018 quarter, lower-than- forecasted imported inflation, and a reduction in pass-through oil prices to inflation. He pointed out that domestic demand was also assessed to be weaker than originally anticipated.

However, he noted that the lower figures were primarily due to some temporary changes that were already being corrected.

He said that due to the temporary nature of the factors influencing the lower figures, the BOJ expected a reversal to normal rates of inflation, roughly five per cent per annum, as of June 2019, which was not likely to affect the lowered interest rate.

http://www.jamaicaobserver.com/news/boj-holds-on-to-2-per-cent-policy-interest-rate_142865