Bank of Jamaica (BOJ) officials capped 2024 with a fourth-straight rate cut and a strong signal that it is not happy with commercial banks failing to follow suit with growth concerns back in the fore.

After meeting for two days last week, the central bank’s monetary policy committee (MPC) said its members voted unanimously for a fourth-straight time to cut rates by a quarter percentage point, bringing the policy rate to 6 per cent. The latest cut brings the policy rate down a full point from where it was when the central bank started to cut rates in August.

Officials now see inflation firmly anchored within the BOJ’s target range of 4 per cent to 6 per cent as headline inflation fell for a third straight month in November to 4.3 per cent, the lowest it has been since June 2021. Core inflation, which measures price increases for everything except for agricultural food products and fuel was measured at 4.2 per cent in November. Notably, the core inflation rate being below the headline inflation rate, indicates that price increases in food and fuel are relatively under control and are not significantly contributing to the overall inflation rate.

The central bank expects inflation to remain within its target band for the next eight quarters, covering 2025 and 2026. However, it notes upside risks from US policy changes, particularly if tariffs are imposed as suggested by President-elect Donald Trump, which could lead to higher import prices and inflation. Jamaica, which imports 40 per cent of its goods from the US, may feel a significant impact.

The BOJ added that it will consider cutting interest rates further only if inflation stays low and near 4 per cent, and turned the spotlight on banks for not cutting their lending rates.

“The MPC noted that interest rates on bank loans, along with other credit terms, remain high and restrictive, indicating that banks may have room to make downward adjustments in those rates,” the BoJ said in its release.

Yet the central bank is not the only one bringing pressure on commercial banks to start cutting rates in an effort to stimulate borrowing that has been slumping, impacting both consumer spending and business expansion.

“We…emphasise the urgent need for commercial banks to expedite the transmission of these rate cuts to borrowers and further monetary easing by the BOJ to stimulate economic growth,” a joint release from the presidents of the Private Sector Organisation of Jamaica (PSOJ), Jamaica Manufacturing and Exporters Association (JMEA) and Jamaica Chamber of Commerce (JCC) said on Friday.

Metry Seaga, PSOJ president, told Jamaica Observer he wished the rate cut was more than the 25 basis points but said he understands the central bank needs to be careful.

“We wait and see, hopefully they will continue to move in that direction and we will start to see the banks follow closely behind, and then we will see the interest in borrowing money increase again and we will get the economy going again,” he added.

Phillip Ramson, who heads the JCC said, he “believes that reduction of rates by commercial banks is necessary to help with productivity because the economy is in recession,” while Sydney Thwaites at the JMEA said “manufacturers and other businesses need the relief now on costs.”

“We can’t grow and it’s time to get back to the policy of growing our economy and lending rate cuts help,” he told Sunday Finance.

“To achieve these objectives, we recommend that the BOJ collaborate with the Bankers’ Association to address inefficiencies in the monetary transmission mechanism. Swift implementation of lending rate adjustments is vital to optimising the intended impacts of monetary policy changes,” the joint release added.

Still, new concerns have emerged.

“With inflation falling to 4.3 per cent in November and trending downwards, we could see inflation falling below the target range of 4 per cent to 6 per cent due to a reduction in domestic demand and the resulting slowing of economic activity,” Keith Duncan, the newly minted head of the Fiscal Advisory Committee, told Sunday Finance reacting to the BOJ’s announcement on Friday.

“This could require more aggressive easing of monetary policy and interest rates in the near future in order to stimulate domestic demand,” he added as he noted that the expectation was for the BOJ to have followed the Federal Reserve — the US central bank — in reducing its own rate quick succession.

For the heads of the PSOJ, JMEA and JCC, the message to banks is quite clear.

“Jamaica cannot afford to revert to years of chronic poor economic growth. Our GDP per capita remains low compared to regional counterparts that continue to achieve higher growth rates. After making significant sacrifices to repair our macro-economy — stabilising inflation, reducing the debt-to-GDP ratio, and maintaining a stable exchange rate — Jamaica must now accelerate its growth trajectory.”

RAMSON… Reduction of rates by commercial banks is necessary to help with productivity because the economy is in recession.

DUNCAN…With inflation falling to 4.3 per cent in November and trending downwards, we could see inflation falling below the target range of 4 per cent to 6 per cent due to a reduction in domestic demand and the resulting slowing of economic activity.

SEAGA…We wait and see, hopefully they will continue to move in that direction and we will start to see the banks follow closely behind .

THWAITES…We can’t grow and it’s time to get back to the policy of growing our economy and lending rate cuts help.