Opposition unhappy with increased BoJ interest rates

The Opposition People's National Party (PNP) has taken issue with the decision of the Central Bank to raise interest rates to maintain the annual inflation rate at 4 per cent to 6 per cent.

The Spokesman on Finance, Julian Robinson, said the increase in interest rates will drive up borrowing costs for businesses and consumers, who are already struggling to survive in a very challenging economic environment. 

The Bank of Jamaica (BoJ) has announced that it will be increasing the policy interest rate offered on overnight balances from deposit-taking institutions from 0.50 per cent to 1.5 per cent.

According to Robinson, cost factors external to Jamaica and primarily driven by the global supply chain are mainly pushing the inflation rate towards 6 per cent.

"Increasing domestic interest rates at this time won't influence those factors," he said.

Robinson said many businesses that rely on imports of raw materials and finished goods are already facing significant increases in freight costs and increased interest rates will put further pressure on them and ultimately on consumers, to whom these costs will be passed.

He said there will be continued upward inflationary pressures in the short term while the global supply chain problems persist, but these should abate in the medium term.

"While the country is recovering from the devastating economic impact of COVID, it is important to maintain interest rates at a level that encourages investment and business expansion, which are necessary to achieve recovery in the shortest possible time," said Robinson.

Robinson notes that the recently announced growth rate of 14 per cent for the second quarter must be viewed within the context of a decline of 18 per cent for the corresponding quarter last year.

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