Jun 2010 Financial News

May inflation beats BOJ outlook

Jun 18, 2010

The Jamaican central bank trimmed interest rates again this week, cutting the price of its one-month certificate of deposit by half a point to 9.0 per cent on the back of better than expected inflation numbers.

The Bank of Jamaica (BOJ) measured movement of consumer prices at 0.6 per cent in May, according to data on its website, saying Wednesday it was lower than expected.

Its estimate places fiscal year inflation at a provisional 2.9 per cent, with BOJ now saying that, combined with the recent strengthening of the Jamaican dollar, headline inflation is likely to complete the year closer to 7.5 per cent.

The US dollar is now valued at J$86 on the spot market, down from a calendar year high of $89.67.

But, playing it safe, the central bank said the target inflation range for fiscal year ending March 2011 "remains 7.5 per cent to 9.5 per cent".

The new interest rate adjustment, which took effect June 17, comes two weeks behind the last change which cut the price from 10 per cent to 9.5 per cent on June 4.

The cost of the six-month CD remains at 15 per cent at last adjustment in December. Treasury bill rates, however, continue to trend down, hitting 9.26 per cent this week at the June auction of the benchmark six-month bill.

BOJ is also boastful of its foreign reserves, saying Wednes-day that its net holdings "now stand at US$1.75 billion and will again outperform the benchmark set under the current standby programme for the end of June", referring to the IMF loan conditionalities.

A week ago, the central bank published figures showing that the NIR had fallen from US$1.74 billion in April to US$1.676 billion at the close of May.

"These resources constitute a strong buffer against financial or weather-related shocks that might otherwise threaten the achievement of the macroeconomic objectives," the BOJ said.


Source:
lavern.clarke@gleanerjm.com
Jamaica Gleaner
Friday June 18, 2010

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