Headwinds ahead
THE country’s two most powerful private sector lobby groups, the Private Sector Organisation of Jamaica (PSOJ) and the Jamaica Manufacturers and Exporters Association (JMEA), are warning the Bank of Jamaica (BOJ) off additional rate hikes later this week, citing that along with slower growth in the United States, the rate hikes are putting the economic recovery at risk.
The warning comes in a joint release from the lobby groups.
“Amidst the challenges from the existing monetary policy by the BOJ and the headwinds from slower growth in the US, Jamaica faces the possibility of headwinds to economic growth and employment,” both groups said in their joint statement.
On Thursday the central bank is expected to announce measures it will take to contain inflation, which was measured at 10.2 per cent in the last 12 months.
That was down from the peak 11.8 per cent out-turn recorded in April.
The out-turn “show[s] a moderation of local inflation, which is in line with our outlook for a gradual reduction of inflation as global commodity prices moderate due to concerns about economic growth”, the statement continued before adding, “The private sector, therefore, cautions the BOJ against further interest rate increases as it fulfils its mandate of containing inflation.”
It also argued that, “While the Jamaican economy has shown resilience as evidenced by the latest quarterly GDP growth numbers of 5.7 per cent, the private sector is concerned that further tightening of monetary policy by the Bank Of Jamaica (BOJ) would slow domestic demand to levels which would put Jamaica’s growth prospects of 2.5 – 4.5 per cent for 2023 at risk.
“This, as consumers would delay purchases and firms put investments on hold due to higher debt servicing costs,” the PSOJ and JMEA added before “once again cautioning the BOJ against the continued tightening of monetary policy as evidenced by their recent 50-basis-points increase in interest rates to 6 per cent.”
At 6 per cent the BOJ’s key policy rate is at its highest level in almost 10 years. The BOJ, in its latest decision in August, called the rate “tentatively appropriate”. The statement added to that, arguing further that “private sector firms and individual consumers are experiencing the brunt of the impact at these levels.”
