KINGSTON, Jamaica — The Jamaica Manufacturers and Exporters Association (JMEA) has strongly advised the Bank of Jamaica (BOJ) against any further increases during the next few review periods and to instead use this time to monitor the events.
In a press release on Wednesday, the JMEA said it has been consistently warning the central bank against their policy of rapid increases in their policy interest rate starting in October 2021. However, it said its warnings have been ignored.
“We take this opportunity in advance of their next review to again call on the BOJ to discontinue further increases for this year,” the association said.
“The monthly inflation rate has been on a declining trend since December 2021. The rate moved from 0.8 per cent in December to 0.3 per cent in May 2022. The highest value of 1.6 per cent was recorded in March due to increases in electricity and fuels. The lowest value of -0.1 per cent was recorded in April 2022. The total inflation rate for the last six months was four per cent, which annualises to eight per cent. This is a significant reduction from the 11.8 per cent at its highest point and suggests further reductions based on the results for April and May,” it continued.
The JMEA said this reduction has been influenced by several factors including the declining trend in world prices generally and the declining trend in shipping costs.
It added that the Jamaican dollar has been relatively stable during much of 2022, which it attributed in part to the improved management of the BOJ. This, it said, has contributed to the decline in the inflation rate.
“In fact, the recent revaluation of the Jamaican dollar will have the effect of reducing the impact of imported inflation. On the other hand, we have observed increases in both home and commercial mortgage interest rates as well as increases in lending rates for commercial loans.
“The increase in lending rates is a direct result of the massive increase in the BOJ policy rate from 0.5 per cent in October 2021 to five per cent in May. We have seen an almost immediate negative impact on home buying in the US as mortgage rates have gone above five per cent. Our mortgage rates were already way above that level, and we are a poor country compared to the US. We believe that these increases in interest rates will have a significant negative effect on the construction industry, both home and commercial projects. The impact will not be seen until late this year into next year when current projects are completed, and new projects dry up,” the JMEA said.
Noting that there are still major uncertainties in the global economy due to the war in Ukraine (oil and wheat prices), the association said we are facing a risky period and therefore need to have a strong economy to face an uncertain future.
“We have already stated that our inflation in 2021 and 2022 is transient, caused by external factors; the BOJ rate increases do nothing to combat this. Instead, continued increases of policy rate has the effect of damaging our fragile economy. Increases in existing loans hurt consumers, workers and small business owners who have a mortgage, a car loan, or a small business loan servicing and are already burdened by price increases,” the JMEA said.