BOJ Slashes Interest Rates

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The Bank of Jamaica is once again cutting its policy interest rate in order to bring inflation back in line with its target.

They’re sending a signal to commercial banks and other lending institutions, to slash their interest rates. In a statement last evening, the BOJ says the policy interest rate will be reduced by 25 basis points to 1.5 per cent. The Bank had cut the rate by a similar amount in December. The central bank says its decision reflects a forecast that inflation will continue to fall below the target at various points over the next two years.

The central bank argues that for inflation to return to the target sooner, banks need to lend more to the private sector. It says this would stimulate increased economic activity by businesses and households. The Bank says its decision to lower the policy rate is not an attempt to influence the exchange rate.

Meanwhile, the BOJ says it’s also reducing the amount of money that deposit-taking institutions, DTIs, must hold at the BOJ. Effective March 1, that will fall from 12 percent to 9 percent.

This is expected to free up nearly $17-billion for DTIs to be able to provide more credit to households and businesses at lower rates and on better terms. The BOJ says to expect further reductions over the course of the year.

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