The Bank of Jamaica (BOJ) has started to publish, in newspapers, the interest rates paid by all commercial banks on all types of deposit accounts, including savings, time deposits and term deposits.
This is to ensure that the increase in its policy interest rates to reduce inflation will benefit persons with higher interest on their deposits in savings accounts at commercial banks.
Details were provided by the Governor of the Bank of Jamaica, Richard Byles, while delivering a monetary policy statement during a meeting of the Standing Finance Committee of the House of Representatives on Wednesday, December 14.
“The publication of this data is an initiative of the Bank, aimed at encouraging the public to act in an informed manner by moving their deposits to the commercial banks where they can benefit from higher deposit rates,” Mr. Byles explained.
He said one of the objectives of the BOJ increasing the policy interest rate it pays to commercial banks on deposits that they make at the Central Bank, is to encourage saving by Jamaicans.
The policy rate was increased from 0.5 per cent in September 2021 to seven per cent in November 2022.
Mr. Byles said that the BOJ remains concerned that while there have been some increases on deposits and loan rates, the pace of upward adjustments in the rates of deposit-taking institutions has been slow.
“In the case of deposit rates, for the period October 2021 to October 2022, in a context where BOJ’s policy rate rose by 650 basis points (bps), the weighted average deposit rate, that is, the interest rate paid on demand, savings and time deposits rose by only 49 bps. This low pass-through reflected the fact that customers of banks who held demand and savings deposits over the period experienced practically no changes in the interest rates paid on these deposits,” the BOJ Governor said.
He informed the Committee that increases in the Policy Interest Rates by the BOJ are expected to also lead to higher interest rates on loans to businesses and individuals but pointed out that these actions are all aimed at reducing inflation or the level of price increases in the economy.
“The Bank of Jamaica recognises that our monetary policy actions to bring inflation back to its target will not be painless to all Jamaicans. However, the Bank is cognisant that the greatest pain of all is the adverse impact of high and unpredictable inflation on the ability of our working population and the most vulnerable members of society to afford the basic necessities of food, transportation and housing, and on the stable long-term economic growth of the country,” Mr. Byles noted.
He added that in this regard, the Bank of Jamaica has reaffirmed its commitment to doing all it can to achieve its primary mandate of returning inflation to the four to six per cent target range without causing undue harm to employment and economic growth.
“Looking ahead, the Bank of Jamaica expects that, consistent with consensus forecast for a fall in commodity prices and the Bank’s overall monetary policy stance, inflation is projected to decline to single digits in early 2023 and return to the four per cent to six per cent target range by December 2023,” the Governor said.