THE heads of three of the country’s business groups are heaping pressure on Bank of Jamaica (BOJ) to start cutting interest rates as soon as this week to help cauterise the predictable economic decline from the continued impact of Hurricane Beryl.

Keith Duncan, chairman of the Economic Programme Oversight Committee — the entity that monitors how well the Government does in raising revenues and spending those funds — said with Beryl likely to have an impact on already weak growth figures, BOJ should bring forward plans to cut interest rates.

BOJ has been signalling that it will start cutting interest rates in the second half of this year but Duncan wants the main outcome of its Monetary Policy Committee meeting, which started Friday and continues Monday, to be an announcement of a rate cut to start Tuesday.

“We need monetary policy easing as the economy, businesses, and consumers have been hit hard,” Duncan told the Jamaica Observer.

Duncan, who is also CEO of JMMB Group, pointing to indications from the Federal Reserve — the US central bank — that it will start cutting its policy rates for the world’s largest economy when it next meets to decide rates in mid-September, said if BOJ continues to stick to its desire to “get ahead of the Fed” when it comes to interest rate movements, this Tuesday will be the perfect time to start.

“I am advocating for a cut in rates of a minimum of 0.25 per cent,” Duncan asserted.

The Bank of Jamaica policy rate is now at seven per cent — after it was quickly jacked up from 0.5 per cent between October 2021 and November 2022 — and has been frozen at its current level since then. It is the rate that banks use as a guide in setting interest rates for all sorts of business and consumer loans, including mortgages, auto loans, credit cards, and for businesses borrowing to invest in new machinery, expansion or acquisition.

Already businesses are reporting a slowdown in consumer spending, mortgages and auto loans are slowing, and more loans are going past due as consumers feel the pinch and resort to juggling spending to get along. Higher prices due to Beryl are expected to further squeeze consumers’ budgets.

But Duncan said with inflation now firmly within the the four to six per cent range for the last five months, rates can start to fall, even if there is a temporary spike in inflation emanating from Beryl. He said the issue is more pressing given that “where agriculture goes, the economy goes”, and if the central bank cuts rates now, the 1.8 per cent growth forecast for this year could either be wiped out or there could be a contraction for the first time since the COVID-19-induced recession in 2020.

“Businesses need a breather, the consumers need a breather in terms of lower interest rates to give them some more disposable income to spend and drive the economy. So if we know that inflation is firmly planted in the range, with only a little blip due to Beryl, the urgency to get the economy from the brink of a contraction is greater than just that blip, and it is going to start showing up in quarter two [July to September],” Duncan continued.

His sentiments about the urgency of a rate cut were also shared by Private Sector Organisation of Jamaica President Metry Seaga, and Sydney Thwaites, president of Jamaica Manufacturers and Exporters Association.

“I am of like mind to Keith; I think that a reduction in interest rates is needed now to [help] ease some of the pressure that the economy is feeling,” Seaga said. “It would be a good way to ease the burden for the people.”

Thwaites called such a move “absolutely essential”.

“It is time. It is essential that rates are cut. We are seeing a slowdown in our economy as a result [of higher interest rates],” Thwaites added.

He said while the impact of Hurricane Beryl is likely to cause some prices to rise, it should be temporary, and therefore should not cause BOJ to hold off on its promise to start cutting rates.

“If we are going to have a chance of investing on the rebuild and resiliency and some growth, it requires a healthy capital market — and right now we are holding that market back and its impact on economic growth with high interest rates,” Thwaites reasoned.