Lending rates at the island’s commercial banks will likely be heading down as early as tomorrow.

This as the Bank of Jamaica, BOJ, today reduced the interest rate on its benchmark 30-day Certificate of Deposit.

Rates on the instrument have fallen 25 basis points, from 5-point-5 percent to 5-point-25 percent.

As we hear in this report from Kalilah Enriquez, the BOJ’s move has set the tone for financial institutions to follow suit.

The reduction in BOJ rates should come as no surprise.

A statement from the Central Bank yesterday says the reduction is the result of the country’s strong performance under the Economic Reform Programme.

This includes low inflation, supported by low oil prices, as well as the marked improvement in the country’s debt to GDP ratio as a result of the Petrocaribe buyback.

Speaking at a press conference about the deal with Venezuela last week, Finance Minister Dr. Peter Phillips hinted at a reduction in interest rates.

The NDX bonds are expected to be honored next February, with funds raised on the international capital markets from last month’s 2-billion US dollar double-bond as part of the Petrocaribe deal.

Banking insiders tell Nationwide News that from as far back as June, as reports of a pending deal became public, some banks began lowering their rates in anticipation of the BOJ’s move.

It shouldn’t take more than a couple of days before all banks follow suit and drop rates, making it cheaper for Jamaicans to borrow money to buy a house or car and access other loans.

President of Money Masters Limited, Claudette Crooks, says the BOJ’s auction of Treasury Bills later this month will also influence interest rate reductions.