THE central bank is projecting that currency in circulation will decline in real terms this yuletide as consumer spending power weakens.

According to the Bank of Jamaica, money in circulation is projected to peak at $59.1 billion this Christmas, but will trail inflation in December.

“The Bank is of the view that spending via currency will further decline by approximately 1.9 per cent in real terms following the real decline of four per cent in 2009. The continued decline is expected in a context of an observed weakness of households’ balance sheets, the recent sharp increase in credit card receivables of the commercial banks and the relatively high levels of non-performing loans in the system,” said a BOJ statement yesterday.

During December, there is normally a stronger demand for cash from consumers associated with increased spending during the holiday period. In this context, the financial institutions order more currency from the BOJ in an effort to increase cash balances in their vaults to satisfy the increased demand. An increase in the demand for cash, however, does not necessarily mean that consumers are buying more goods and services than they bought a year ago.

The BOJ is projecting that the currency stock will increase by approximately $9 billion or 19.5 per cent, relative to the end of November, to just under $57 billion by the end of December 2010. This represents annual growth of 9.1 per cent relative to 5.8 per cent for 2009 and 3.8 per cent in 2008.