MEMBERS of the country’s financial sector are breathing a sigh of relief over the Bank of Jamaica’s (BOJ) decision to pause the rise in its policy rate, which jumps to 7 per cent on Monday — the highest it has been since March 2011.

“It’s welcomed. The pause is very much welcomed,” Rezworth Burchenson, CEO, VM Investments and VM Wealth, told the Jamaica Observer in reaction to the BOJ’s decision. “The local financial market would have seen the intended effects of the increase in interest rates and…based on the continued turbulence globally, I think the pause is welcome to give the players some ability to assess where they are and to strategise for the next 12 to 24 months to meet their objectives,” he continued.

“That’s not surprising, that was expected,” Gary Peart, CEO, Mayberry Investments told Sunday Finance. Peart pointed out that with the BOJ being among the first central banks to start raising rates to combat inflation, it can now “justify [a] wait-to-see” if the measures are containing inflation rather than continuing to hike rates, which “could be much more painful”.

The BOJ decided to pause its rate hikes, a policy decision which was first signalled in August, even as headline inflation reached 9.9 per cent in October, with core inflation — a measure which excludes volatile food and energy prices — reaching 9 per cent.

“After 12 months into its tightening cycle, the MPC [Monetary Policy Committee] therefore judges that it is appropriate to pause further policy rate increases and to watch its pass-through effects on deposit and loan rates,” the BOJ said in a statement accompanying its rate decision Friday.

This pause is also conditional on the MPC seeing more pass-through of international commodity price reductions to domestic prices, and on the Fed not exceeding their targeted rate increase for 2022 and 2023.

But how long could this pause last?

“It’s conditional on the incoming data,” Robert Stennett, deputy governor of the Bank of Jamaica, told Sunday Finance.

“The pause is to say, ‘We feel that we are now at a point where we can absorb the effects of our monetary policy actions…to bring inflation down, but if the circumstances change then we will review it.’ ” Stennett was quick to point out that the pause in rate hikes is “not [a signal] that we are in a loosening cycle. We are not there yet”. Loosening monetary policy will involve reducing interest rates, which the central bank has increased after its last ten monetary policy meetings since September last year.

“We will pause and continue to evaluate, and if things evolve as we have thought then it becomes a permanent pause…meaning no more increases until when we see there is scope to, for example, loosen. Then we can start making considerations and signals about [loosening].”

Peart believes that “loosening” could start in the next 12 months.

“Based on the last communique and everything that we have seen, we expect rates to start slowing in 2023. We are just in November here [and so] I wouldn’t be surprised to see, by the end of 2023 into early 2024, rates starting to trend down again as well,” he added.

He argued that as supply chain issues continue to quieten down the pass-through will benefit local inflation and by extension, interest rates.