BOJ to conduct 2nd cash reserve reduction for 2019

Thursday, May 16, 2019

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THE Bank of Jamaica (BOJ) will be reducing the cash reserves that deposit-taking institutions are required to hold against their prescribed liabilities by two percentage points to nine per cent, effective June 3.

This is the second reduction in the cash reserve requirement by the central bank for 2019. Effective March 1, BOJ reduced the cash reserves requirement for deposit-taking institutions by three percentage points to nine per cent. That reduction allowed the release of $16.8 billion to deposit-taking institutions.

In a statement yesterday, the BOJ noted that the planned reduction in the cash reserve requirement next month will increase liquidity in the financial system by a further $12.3 billion, thereby supporting the expansion of credit to businesses and households at lower rates and on better terms. Additionally, the overall liquid asset requirement is expected to fall to 21 per cent, effective 03 June.

The BOJ reckons that increasing the pace of expansion in private-sector credit will stimulate economic activity by businesses and households across Jamaica.

“The series of reductions of the cash reserve requirement is possible given the entrenchment of macroeconomic stability in Jamaica. The timing and scope for the next reduction will be determined on the basis of assessments of market conditions,” the BOJ said.

No change is, however, being made to the reserve requirements applicable to foreign currency prescribed liabilities.

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