Jamaica (BOJ) is about to begin a programme of transitioning its policy rate to an overnight interest rate, replacing use of the benchmark 30-day CD.

Scheduled for implementation over a six-month period, it will commence with an adjustment of the interest rate on its overnight deposit facility this month.

The new measure was disclosed in the 13th review of the Extended Fund Facility agreement between the International Monetary Fund (IMF) and Jamaica, which was released on Monday.

The rate for the 30-day CD was last adjusted on May 31, to five per cent from 5.25 per cent. All other lending facilities are linked to this policy rate.

Requests by the Jamaica Observer for more information on the new measure did not get a response up to press time.

Otherwise, it was noted in the IMF review that the BOJ will “continue to ensure the provision of adequate liquidity to the financial system at a price consistent with its policy goals”.

“The BOJ is developing a comprehensive strategy to improve the effectiveness of its open market operations and liquidity assurance framework, in order to enhance the monetary policy transmission mechanism,” the IMF said.

In a bid to rein in speculation on the US dollar and otherwise reduce the appetite for the currency, the BOJ also plans to remove the bias in the cash reserve requirement structure that favours foreign currency deposits by gradually equalising the reserve requirements for foreign currency and domestic currency deposits in the banking system, starting October 2016.

“This initiative will reduce the attractiveness of foreign-currency denominated investments relative to Jamaican dollar alternatives,” the IMF review stated.

Otherwise, it was indicated that the BOJ will continue to facilitate the development of the foreign exchange market.

“The BOJ, in consultation with IMF TA (technical assistance), is exploring mechanisms to improve price discovery in the FX (foreign exchange) market and to prevent excessive speculative position-taking in the market. The BOJ also remains cognisant of the need to purchase foreign currency to further boost net international reserves,” the IMF said.