BOJ holds rate again

THE Bank of Jamaica announced Monday that it will hold its policy interest rate at 7 per cent for at least the next six weeks on continuing signs that inflationary pressure is easing.

Yet, a central bank frustrated that a year of rate hikes has done little to convince commercial bankers and other deposit-taking institutions to follow suit strongly has forced BOJ to reach for yet another tool it hopes will help to get the desired outcome.

That tool is the cash reserve requirement (CRR).

The central bank’s monetary policy committee (MPC) said, come April 1, it will require banks to hold 6 per cent of their customers’ deposits — the cash reserve requirement — in Jamaican dollars as reserves, effectively money it will not have to onlend. For foreign currency, the portion of deposits to be held as reserves will be increased to 14 per cent on that day as well. The new cash reserve requirement will be 1 percentage point above the current level and is the first increase since they were progressively reduced since 2019.