February 2020 • Volume 20 • Number 3
February 2020 Volume 20 Number 3
ⓒ 2020 Bank of Jamaica Nethersole Place Kingston Jamaica
Telephone: (876) 922 0750-9 Fax: (876) 967 4265 Email: [email protected] Website: www.boj.org.jm
ISSN 0799 1037
Printed in Jamaica
Monetary Policy at the Bank of Jamaica
Bank of Jamaica’s monetary policy objective is to achieve an inflation target of 4 - 6 per cent per annum. This low, stable and predictable inflation rate, measured as the change in the consumer price index that is published by the Statistical Institute of Jamaica, will facilitate sustained growth and development in Jamaica.
The inflation target was established by the Minister of Finance and the Public Service in consultation with Bank of Jamaica in September 2017.
The Bank uses a variety of tools to achieve its inflation target, the main one being the interest rate on overnight balances in the current accounts of deposit‐taking institutions at Bank of Jamaica. Changes in the Bank’s policy rate signals the Bank’s policy stance towards achieving its inflation objective, which is transmitted to prices through the financial markets and then through spending and investment decisions.
Monetary policy decisions affect inflation with a lag of between 4 to 8 quarters. For this reason, monetary policy in Jamaica is forward looking and the Bank puts much effort into establishing its view of the economy in the future, and bases its decision on this view. It is also important that the Bank clearly and transparently communicates this view of the future to the Jamaican public. The Bank undertakes an assessment of the economy eight times during each calendar year and publishes its decisions in accordance with a pre-announced schedule. On four of these occasions, when most data on the key macro-economic variables are available, the Bank prepares a comprehensive macroeconomic forecast covering the international economy, the fiscal accounts, balance of payments, money, credit, interest rates, GDP and prices.
This Monetary Policy Report describes the Bank’s most recent policy decision by the Bank and outlines the Bank’s projections for inflation in Jamaica and the main macroeconomic variables that affect it. The Monetary Policy Report is prepared and published once every three months at the time of four of the Bank’s monetary policy announcements.
This page was intentionally left blank Overview
During the December 2019 quarter, Bank of Jamaica maintained the policy interest rate at 0.50 per cent per annum. The decision to hold the policy rate unchanged is based on the Bank’s continued view that monetary conditions are generally appropriate to support inflation remaining within the inflation target of 4.0 per cent to 6.0 per cent over the ensuing eight quarters.
Annual inflation accelerated above the Bank’s target band during the December 2019 quarter, to 6.2 per cent at December 2019, up from 3.4 per cent at September 2019. This acceleration primarily reflected higher agricultural food price inflation. Over the next eight quarters, inflation is projected to average 4.7 per cent before gradually approaching the mid-point of the target (5.0 per cent) in the medium-term. This forecast is mainly predicated on higher imported inflation and accommodative monetary conditions, partly offset by a restrictive fiscal stance. In addition, the outlook for agricultural food prices has been revised upwards given the increased likelihood of adverse weather.
The Jamaican economy is estimated to have grown in the range of -0.5 per cent to 0.5 per cent for the December 2019 quarter, a slower pace relative to the 0.6 per cent recorded for the September 2019 quarter. The estimated growth in the quarter mainly reflected an increase in consumption (private and government) spending, partly offset by a decline in net exports. From the perspective of aggregate supply, there was estimated growth in most industries for the review quarter, with the exception of Mining & Quarrying and Construction. Over the next eight quarters, real GDP is projected to expand at an average quarterly rate in the range of 0.5 per cent to 1.5 per cent, in line with the previous projection. The risks to the growth forecast continue to be skewed to the downside.
Global economic growth for the December 2019 quarter is estimated to have decelerated relative to the September 2019 quarter. Global growth for the next eight quarters is projected to average 3.0 per cent, unchanged relative to the previous forecast, and is projected to average 3.1 per cent over the medium-term.
The current account deficit is projected to remain broadly sustainable over the next eight quarters and into the medium- term. The current account, after accounting for FDI-related imports, is projected to reflect an average surplus of 1.5 per cent of GDP for the 3-year forecast period of FY2019/20 to FY2021/22.
Accommodative monetary conditions as well as increased competition in the market for loanable funds continued to support growth in overall financing in Jamaica. Growth in the monetary aggregates for the December 2019 quarter was faster than previously projected while growth in monetary base was below previous projections. Over the ensuing eight quarters, growth in private sector credit is projected to be higher than previous projections.
Bank of Jamaica will continue to closely monitor the impact of the significant monetary loosening on credit expansion, capital market transactions, overall economic activity and, consequently, the impact on inflation, to determine the appropriate future path for the policy rate.
Richard Byles Governor Contents
1.0 Inflation 1 Recent Developments 1 Inflation Outlook & Forecast 2 Inflation Risks 3 Box 1: Businesses’ Inflation Expectations Survey 3
2.0 International Economy 6 Trends in the Global Economy 6 Trading Partners’ Inflation 10 Trends in Trading Partners’ Exchange Rates 11 Terms of Trade 12 Commodity Prices 12 External Financial Markets 14 Global Stock Market 15 Box 2: Global Economic Growth in Selected Economies 7
3.0 Real Sector 16 GDP Growth and Output Gap 16 Aggregate Supply 16 Aggregate Demand 18 Labour Market Developments 19 Real Sector Outlook 19
4.0 Fiscal Accounts 20 Recent Developments 20 Near-term Outlook 21
5.0 Balance of Payments 22 Recent Developments 22
6.0 Monetary Policy & Market Operations 24 Recent Developments 24 Liquidity Conditions 24
7.0 Financial Markets 26 Market Interest Rates 26 Exchange Rate Developments 26 Equities Market 27
8.0 Monetary Aggregates 29 Money 29 Private Sector Credit 30 Monetary Projections 30
9.0 Conclusion 32
Additional Tables 33 Glossary 47 List of Boxes 51
ABBREVIATIONS & ACRONYMS
B-FXITT Bank of Jamaica’s Foreign Exchange Intervention & Trading Tool BOJ Bank of Jamaica BOP Balance of Payments Brexit British Exit bps Basis points
CAD Current Account Deficit
CDs Certificates of Deposit CDI Credit Demand Index CIF Cost, Insurance and Freight CPI Consumer Price Index CPI-AF Consumer Price Index without Agriculture and Fuel CPI-F Consumer Price Index without Fuel CPI-FF Consumer Price Index without Food and Fuel CSI Credit Supply Index CY Calendar Year
DIJA The Dow Jones Industrial Average DTIs Deposit-taking Institutions
EFR Excess funds rate EGOF Electricity, Gas & Other Fuels EMBI+ JP Morgan Emerging Market Bond Index e.o.p End of Period EPI Export Price Index EFR Excess Funds Rate
Fed US Federal Reserve System FNB Food & Non-Alcoholic Beverages FTSE Financial Times Stock Exchange FY Fiscal Year
GDP Gross Domestic Product GOJ Government of Jamaica GOJGBs Government of Jamaica Global Bonds
HWEG Housing, Water, Electricity Gas & Other Fuels
IES Inflation Expectations Survey IMF International Monetary Fund IPI Import Price Index IRC Interest Rate Corridor
JMD Jamaica Dollar JSE Jamaica Stock Exchange
LHS Left Hand Side LME London Metal Exchange
M2J Broad money supply M2+ Broad money supply that includes foreign currency deposits MCI Monetary Conditions Index
NDA Net Domestic Assets NIR Net International Reserve NOP Net Opening Position o/w Of which O/N Overnight OMO Open Market Operations
PMMR Private Money Market Rates
QoQ Quarter over Quarter QPC Quantitative Performance Criteria
RADA Rural Agriculture Development Agency REER Real Effective Exchange Rate
S&P Standard & Poor’s SBA Stand-by Agreement SCT Special Consumption Tax SLF Standing Liquidity Facility
T-Bill Treasury Bill TP Trading Partners
UR Unemployment Rate US United States USD US dollar
WASR Weighted Average Selling Rate WTI West Texas Intermediate
Quarterly Monetary Policy Report February 2020
1.0 Inflation Annual inflation in Jamaica accelerated to 6.2 per cent at December 2019 from 3.4 per cent at September 2019. This outturn exceeded the upper limit of the Bank’s target of 4.0 per cent to 6.0 per cent and was largely related to higher agricultural food price inflation.
Inflation is projected to average 4.7 per cent over the next eight quarters (March 2020 to December 2021) before gradually approaching the Bank’s 5.0 per cent target in the medium term. This is slightly higher than the average inflation rate of 4.5 per cent previously projected, mainly due to higher imported inflation and accommodative monetary conditions, partly offset by a restrictive fiscal stance. In addition, the outlook for agricultural food prices has been revised upwards given the increased likelihood of adverse weather.
Recent Developments and Near term cent at September 2019, largely due to increases in international oil prices in the December 2019 Outlook quarter, along with some exceptional temporary The annual point-to-point inflation rate at adjustments in electricity rates. The Transport December 2019 was 6.2 per cent, an acceleration (TRAN) division also increased at an annual rate of relative to the 3.4 per cent recorded at September 0.9 per cent at December 2019, compared with a 2019 and the 2.4 per cent recorded at December decline of 1.3 per cent at September 2019. 2018. The annual headline inflation rate at Figure 1: Vegetables and Starchy Foods Supply December 2019 rose above the Bank’s target of 4.0 (Tonnes) per cent to 6.0 per cent and was also higher than the Bank’s November 2019 projection of 4.6 per cent for the month.
The acceleration in inflation for the December 2019 quarter, relative to the preceding quarter, mainly reflected the impact of an acceleration in agricultural food price inflation, supported by increases in electricity rates and transportation costs. The Vegetables & Starchy Foods (VSF) class Source: MOA & BOJ Calculations accelerated sharply to an annual rate of 32.4 per The graph represents quarterly supply (in tonnes) for vegetables and selected starches provided by Ministry of Agriculture. cent, compared with an increase of 16.2 per cent at September 2019. Higher prices for vegetables and The Bank’s main measure of core inflation (inflation starchy foods were caused by adverse weather that excludes the immediate influence of agriculture conditions (drought followed by heavy rains) that and energy prices - referred to as CPIAF) was affected the Island between June and October unchanged at December 2019. CPIAF at December 2019. This was coupled with the impact of crop- related diseases which affected some items. A lower level of crop production was therefore observed in the September 2019 quarter (see Figure 1). The Electricity, Gas & Other Fuels (EGOF) sub- division accelerated to an annual rate of 1.5 per cent at December 2019, from a decline of 6.4 per
Bank of Jamaica 1 Quarterly Monetary Policy Report February 2020
2019 was 2.9 per cent broadly similar to the rate at The Bank’s survey of businesses’ inflation September 2019 (see Figure 2).1 expectations (IES) at November 2019 indicated that businesses’ one-year ahead inflation expectations Figure 2: Core Inflation and CPI of 5.0 per cent was in line with the mid-point of the (Annual per cent change) Bank’s inflation target but marginally above the results of the October 2019 survey. Additionally, expectations for inflation 12-months ahead have been rising since August 2019. Similar to the previous survey, respondents expect the cost of stock replacement to reflect the highest increases among input factors over the next twelve months. There was an increase in the proportion of respondents anticipating higher costs for
fuel/transport and raw materials during the year. Notably, the number of respondents who expected Source: STATIN & BOJ increases in wages decelerated to 6.1 per cent,
relative to the 9.0 per cent in the previous survey. Inflation Outlook & Forecasts The cost of wages and salary was least expected to increase over the next twelve months. Perceptions Inflation is projected to decelerate to 5.3 per cent at about present and future business conditions were March 2020 and remain broadly at that level until less optimistic than the October 2019 survey (see June 2020 (see Figure 3). Lower inflation for the Box 1: Businesses’ Inflation Expectations Survey). March 2020 quarter, relative to the December 2019 quarter, mainly reflects a sharp deceleration in Vegetable and Starchy food inflation given expected Inflation Risks declines in agricultural food prices. This is based on The risks to inflation are skewed to the upside. an assessment that agricultural food supplies will Climate change and increased volatility in improve over the near-term. However, some agricultural prices poses a symmetric risk to the administered adjustments to electricity rates, Bank’s ability to keep inflation within the target minimum wages, artisan wages and water rates are range. There are also risks to inflation from higher expected to occur during the March and June 2020 exchange rate volatility. Conversely, there are quarters. emerging risks to the global and domestic economy
stemming from epidemics and climate change. In Figure 3: Component Contribution to Inflation particular, the continued spread of the novel Coronavirus poses a downside risk to domestic and international economic growth. In addition oil prices could fall while the prices for raw materials and manufactured goods could rise. The overall risk to domestic inflation of this epidemic could be negative.
Source: STATIN & BOJ
1 The sharp optic in headline inflation for 2017 and December prices, respectively. In this context, the trends in core inflation do 2019 reflects shocks to oil prices and vegetable and starchy food not explicitly mirror that of headline inflation.
Bank of Jamaica 2 Quarterly Monetary Policy Report February 2020
Box 1: Businesses’ Inflation Expectations Survey – Figure 4: Comparative Headline Inflation December 2019 Forecasts
Overview The Bank’s Survey of Businesses’ Inflation Expectations (IES) at December 2019 indicated that one-year-ahead inflation expectations was broadly in-line with the mid-point of the Bank’s inflation target of 5.0 per cent. As was the case in the previous survey, respondents expected the cost of stock replacement to reflect the highest increases among input factors over the next twelve months. Source: Bank of Jamaica The proportion of respondents who held this view was higher relative to the November 2019 survey. On the other hand, wages and salary was expected to increase the least over the next twelve months.
There was a slight decrease in the proportion of
respondents anticipating higher costs for raw materials with a corresponding decrease in the proportion indicating higher utility costs during the year. Approximately 51 per cent of the respondents anticipated an increase in wages over the next twelve months, an increase relative to that in the
November 2019 survey. Perceptions about present
and future business conditions improved for the month and decreased on a yearly basis in the latest survey.
Inflation Expectations
In the December 2019 survey, respondents’
expectation of inflation 12 months ahead increased
slightly to 5.1 per cent, relative to 5.0 per cent in the November 2019 survey. Furthermore, businesses expected an inflation rate for CY2019 of 4.9 per cent, which is below the CY2019 outturn of 6.2 per cent (see Figure 1).
Perception of Inflation Control The index of inflation control increased when compared to the November 2019 survey (see Figure 2). This outturn reflected an increase in the share of respondents who were “satisfied” along with a
decline in the proportion of respondents who were
“dissatisfied” with how inflation was being
controlled.
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Exchange Rate Expectations Figure 1: Expected 12-Month Ahead Inflation Similar to the November 2019 survey, respondents Question: Based on the average monthly inflation for the last 12 months, expected the exchange rate to depreciate over the what do you think the average monthly rate will be for the next 12 months? a. next 3-month, 6-month and 12-month horizons (see Table 1). Furthermore, relative to the November 2019 survey, respondents expected a slower pace of depreciation.
Table 1: Exchange Rate Expectations
Question: In July 2019 the exchange rate for the Jamaican Dollar (JA$) in respect of the United States Dollar (US$) was $136.63. What do you think the rate will be for the following periods?
Expected Exchange Rate Change at Survey
Date (%) Periods Ahead Aug-19 Oct-19 Nov-19 Dec-19
2.3 0.1 2.6 0.2 b. 3-Month 3.0 0.6 2.6 0.6 6-Month 3.1 1.0 2.6 1.2 12- Month
Source: Businesses’ Inflation Expectations Survey. Note: The responses have been converted to percentage change.
Interest Rate Expectations The majority of respondents expected the Bank’s
policy rate, three months ahead, to remain Source: Businesses’ Inflation Expectations Survey unchanged. The proportion of respondents of this
view increased relative to the previous survey while Figure 2: Perception of Inflation Control Question: How satisfied are you with the way inflation is there was an increase in the proportion who believe being controlled by the Government? it will be “significantly lower”. The 90-day Treasury bill (T-Bill) yield, three months ahead, was expected to remain at 1.5 per cent when compared to the 1.5 per cent recorded in the November 2019 survey.
Perception of Present and Future Business Conditions In the December 2019 survey, businesses were more optimistic about present business conditions as the proportion of respondents of the view that conditions are “better” increased. Relative to November, businesses were also more optimistic about the future as the proportion of respondents who believe that conditions will be “better” Source: Businesses’ Inflation Expectations Survey Notes: The Index of Inflation Control is calculated as the number of satisfied increased. respondents minus the number of dissatisfied respondents plus 100
Expected Increase in Operating Expenses
Respondents indicated that they expected the
largest increase in production costs over the next 12
months to emanate from stock replacement. This
was followed by utilities and costs for fuel/transport.
Bank of Jamaica 4 Quarterly Monetary Policy Report February 2020
The cost for wages and salary reflected the least increase (see Table 2).
Table 2: Expectations about Operating Expenses
Question: Which input do you think will have the highest price increase over the following time periods?2
Oct-19 Nov-19 Dec-19
Utilities 27.9 28.5 26.0 33.1 32.2 38.8 Stock Replacement
Raw Materials 12.5 9.8 9.2 Fuel & Transport 16.4 22.1 16.1 Wages & Salary 7.5 6.1 8.9 Other 0.0 0.0 0.0 Not Stated 2.6 1.2 1.0 Source: Survey of Businesses’ Inflation Expectations (IES)
Figure 3: Perception of Present Business Conditions Question: In general, do you think business conditions are better, about the same or worse than they were a year ago in Jamaica?
Source: Businesses’ Inflation Expectations Survey Notes: The Index is calculated using the balance score method (Better – Worse +100)
Figure 4: Perception of Future Business Conditions Question: Do you think that a year from now business conditions will get better, about the same as present or get worse?
Source: Businesses’ Inflation Expectations Survey Notes: The Index is calculated using the balance score method (Better – Worse +100)
2 The 3-month, 6-month and 12-month horizons.
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2.0 International Economy Global economic growth for the December 2019 quarter is estimated to have decelerated relative to the September 2019 quarter. Global growth for the next eight quarters is projected to average 3.0 per cent, unchanged relative to the previous forecast, and is projected to average 3.1 per cent over the medium-term. Of note, real output growth in the US for the next eight quarters is projected to average 1.8 per cent, above the previous forecast of 1.7 per cent but at a slower pace than potential GDP.
The US Federal Reserve maintained interest rates in January 2020. BOJ projects that the target for the Fed Funds rate will remain unchanged over the next eight quarters, which will support a relatively stable path for market interest rates, including Jamaica’s sovereign bond yields. The spreads on GOJ sovereign bonds are also expected to remain relatively stable over the next eight quarters. Jamaica’s Terms of Trade (TOT) Index for the next eight quarters, on average, is projected to deteriorate, at an unchanged average pace relative to the previous projection. This assumption mainly reflects the impact of higher consumer and raw material import prices, the impact of which is offset by a slower pace of decline in implicit tourism prices and a faster pace of decline in oil prices.
Trends in the Global Economy Global growth is projected to average 3.0 per cent Global economic growth for the December 2019 over the next eight quarters (March 2020 to quarter is estimated at 2.5 per cent, a slowdown of December 2021), unchanged relative to the previous 0.3 percentage point relative to the growth in the projection (see Figure 5).1, 2 The projected growth is September 2019 quarter. This estimate is also 0.3 supported by (i) easing trade tensions between the percentage point below the Bank’s previous forecast US and its main trading partners, in particular China, and primarily reflects a larger contraction in Japan which should improve investor confidence and as well as weaker growth in Canada (see Box 2: global demand3, 4 and (ii) reduced uncertainty Global Economic Growth in Selected Economies).
1 A report presenting the J.P. Morgan Global Composite PMI, an sentiment, causing global growth to fall below the projected index which measures changes in total output across both baseline. manufacturing and service sectors, highlighted that the rate of 3 Following months of numerous rounds of negotiations, on 15 global economic expansion accelerated for the second successive January 2020, the US and China signed the first phase of their month in December 2019, hitting its highest level since April 2019. interim trade agreement, marking a truce in the trade war between The uptick was underpinned by stronger inflows of new work, rising both nations. The deal paves the way for a much larger Phase Two employment and improved business optimism. International trade deal that tackles structural issues. The Phase One trade agreement remained a drag on growth, however, as new export orders removes the downside risk of a never-ending increase in tariffs contracted for the thirteenth successive month. imposed by the US and China on each other’s imports and the 2 According to the IMF’s January 2020 World Economic Outlook, downside risks to the outlook for global growth. However, the global output is estimated to have grown by 2.9 per cent in 2019. details of the deal suggest some upside risk to economic growth The global economy is projected to grow at 3.3 per cent in 2020 in 2020 if China follows through on at least some of its and 3.4 per cent in 2021, – 0.1 and 0.2 percentage points below commitments. Although the effective tariff rate on Chinese the October 2019 WEO projections. While the baseline growth products will remain significantly higher than what it was before the projection is weaker, developments since October 2019 point to a trade war began in 2018, it will be lower than what it would have set of risks to global activity that is less tilted to the downside been if the US administration had followed through on its existing compared to the October 2019 WEO. Downside risks, however, plans to hike tariffs further. remain prominent, including rising geopolitical tensions, notably 4The United States, Mexico and Canada have reached an between the US and Iran, intensifying social unrest, further agreement to modernize the 25-year-old North American Free worsening of relations between the US and its trading partners, and Trade Agreement (NAFTA) into the United States-Mexico-Canada deepening economic frictions between other countries. A Agreement (USMCA). It includes major changes on cars as well as materialization of these risks could lead to rapidly deteriorating
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Box 2: Global Economic Growth in Selected Canada Economies The Canadian economy is estimated to have expanded by 0.7 per cent for the December 2019 China quarter, a deceleration of 0.6 percentage points Economic growth in the Chinese economy is compared to the September 2019 quarter. The estimated at 6.0 per cent for the December 2019 Canadian economy slowed sharply in the December quarter, unchanged relative to the growth recorded 2019 quarter reflecting in part a number of for the September 2019 quarter, the slowest pace idiosyncratic and reversible shocks. These factors since 1992. include strikes at General Motors and Canadian National Railway Company, and the Keystone Going forward, the gradual slowdown in China is pipeline outage.8 projected to persist, despite increased stimulus measures to counter the negative effect of trade For the next eight quarters, GDP growth in Canada tariffs as well as the commitment of the US and is projected in the range of 1.4 per cent to 1.8 per China in January 2020 to a phase one trade cent. agreement. The deceleration in growth is mainly due to a slowdown in labor productivity growth in China. United Kingdom (UK) In this context, GDP growth in China is projected in The UK economy is estimated to have expanded by the range of 5.8 per cent to 5.9 per cent over the 0.9 per cent in the December 2019 quarter, a slower next eight quarters.5 pace of growth when compared to the expansion of
1.1 per cent in the previous quarter. The growth Japan estimate for the December 2019 quarter reflects the The Japanese economy is estimated to have continued slowdown in manufacturing and services recorded a contraction of 3.7 per cent for the industries.9 December 2019 quarter, compared to an expansion of 1.8 per cent in the September quarter.6, 7 Growth in the UK economy over the next eight
quarters is projected in the range of 0.6 per cent to For the next eight quarters, GDP growth in Japan is projected in the range of 0.6 per cent to 1.4 per cent.
new policies on labor and environmental standards, intellectual relief, protect against downside economic risks and prepare the property protections and some digital trade provisions. country for longer-term growth after the 2020 Tokyo Olympics. 5 Subsequent to the forecast, reports of the outbreak of a new 8 According to Statistics Canada, on a monthly basis, Canada’s strain of coronavirus in China has sent the country into crisis mode real GDP growth contracted by 0.1 per cent in October 2019 mainly and increased economic slowdown concerns. On 30 January 2020, reflected significant declines in wholesale sales and the World Health Organization (WHO) noted that the new manufacturing. This outturn represents the first decline in eight coronavirus outbreak was a global health emergency, months and follows tapering growth. In addition, the agency acknowledging that the disease now represents a risk outside of reported weak trade figures for November 2019 partly attributed to China. As China fights the coronavirus, the economic impact in the fallout from a strike that impacted Canadian National Railway China is already apparent with about 35 million people under Company, the country’s largest railroad network, and the effective lockdown, air travel curtailed and some tourist temporary shutdown of the TC Energy Corp.’s Keystone pipeline destinations closed in an effort to contain the virus from spreading after a spill. across the country. The coronavirus shares some similarities with 9 The Office for National Statistics (ONS) reported that monthly the Severe Acute Respiratory Syndrome (SARS) outbreak. The gross domestic product declined by 0.3 per cent in November economic impact of the 2002-2003 SARS pandemic is hard to 2019, driven by declines in both services and production. This estimate because the event coincided with the recovery from a followed growth of 0.1 per cent in both September and October global recession. 2019. Gross domestic product increased on a quarterly basis by 6 According to estimates released by the Japan Centre for 0.4 per cent in the September 2019 quarter, relative to previous Economic Research, GDP in Japan declined by 3.7 per cent for the quarter. Further, the ONS reported that the UK economy recorded month of October 2019, reflecting decline in consumption growth of 0.1 per cent in the three months to November 2019 spending following the increase of the national consumption tax compared with the previous three-month period, confirming the rate to 10.0 per cent from 8.0 per cent. estimate for a slowdown in the December 2019 quarter. 7 In December 2019 Japan’s Prime Minister announced stimulus measures totalling 26 trillion yen (US$239 billion) to aid disaster
Bank of Jamaica 7 Quarterly Monetary Policy Report February 2020
1.5 per cent as economic uncertainties surrounding Figure 5: Global Growth Projection* BREXIT ease.10 (Per cent)
Euro Area Economic growth for the Euro Area in the December 2019 quarter was estimated at 1.1 per cent, a slower pace of growth when compared to the expansion of 1.2 per cent in the previous quarter.
For the next eight quarters, GDP growth in the Euro Source: Bloomberg *Bank of Jamaica’s Estimate Area is projected in the range of 0.8 per cent to 1.1 per cent. For the US, the Bureau of Economic Analysis’
(BEA’s) advance estimate indicates that output
growth for the December 2019 quarter was 2.1 per surrounding the UK’s formal exit from the EU. cent, following an expansion of 2.1 per cent in the However, the impact of this is offset by a weaker September 2019 quarter. 12 The increase in real GDP outlook for key emerging market economies, in the December 2019 quarter reflected growth in notably India. Recovery in global activity in 2020 is personal consumption expenditures (PCE), also supported by easing financial conditions as government spending (federal, state and local), central banks have adopted more accommodative residential fixed investment, and exports, the effects monetary policy postures to return inflation to their of which were partly offset by negative contributions respective targets and to stimulate growth within from private inventory investment and nonresidential their economies.11 Nonetheless, risks remain fixed investment. Imports, which are a subtraction skewed to the downside. in the calculation of GDP, declined.
Between the March 2020 and the December 2021
quarters, real output growth in the US is projected
to average 1.8 per cent, above the previous forecast
of 1.7 per cent but a slower pace than potential GDP (see Figure 6). 13, 14, 15 In particular, GDP is expected
10 The UK will formally leave the EU on 31 January 2020 with a 2019, real GDP increased at 2.3 per cent compared with an withdrawal deal. Following its departure, the UK will enter a increase of 2.9 per cent in 2018, in line with the Bank’s projections. transition period until 31 December 2020. The UK will effectively 13 Between the December 2019 and September 2021 quarters, remain in the EU's customs union and single market - but will be based on the US Congressional Budget Office’s (CBO) estimate, outside the political institutions and there will be no British potential output growth in the US is projected at 2.1 per cent. members of the European Parliament. The first priority will be to 14 According to the IMF’s January 2020 WEO, real GDP growth is negotiate a trade deal with the EU. The government has ruled out expected to moderate from 2.3 per cent in 2019 to 2.0 per cent in any form of extension to the transition period. If no trade deal has 2020 and decline further to 1.7 per cent in 2021 (0.1 percentage been agreed and ratified by end-2020, then the UK faces the point lower for 2020 compared to the October 2019 WEO). The prospect of tariffs on exports to the EU. moderation reflects a return to a neutral fiscal stance and 11 Several central banks are implementing expansionary monetary anticipated waning support from further loosening of financial policies. More recent policy decisions since October 2019 include conditions. rate reductions from the Hong Kong Monetary Authority, the Bank 15 Of note, the upward revision to US GDP growth primarily reflects of Thailand, the Central Bank of Egypt, the People’s Bank of China, improved market sentiment which has been supported by the Central Bank of Brazil, the Bank of Mexico, the Central Bank of favourable news of US-China negotiations, leading to some retreat the Republic of Turkey and the South African Reserve Bank. from the risk-off environment which was factored into the 12 The Bank’s most recent estimate anticipated that GDP growth November 2019 forecast. The November 2019 forecast assumed for the December 2019 quarter would have slowed to 1.8 per cent. the downside risk of an escalation of tariffs imposed by the US and The better than expected forecast mainly reflected greater than China on each other’s imports in 2020. Consequently, this phase anticipated contraction in imports as well as higher government one deal reduces these downside risks resulting in improved expenditure. Imports declined by 8.7 per cent due to a decline in household and business confidence and leads to stronger consumer goods and motor vehicle imports. Nonetheless, for
Bank of Jamaica 8 Quarterly Monetary Policy Report February 2020
to decelerate between December 2019 and the June quarter (see Figure 7).18 The projected gap over the 2020 quarter reflecting a slowdown in consumer next eight quarters (March 2020 to December 2021) spending, weak investments and a rise in imports. has been revised upwards, given the less For the period 2022 to 2024, economic growth in pessimistic outlook for the US economy. the US is projected to average 1.8 per cent, Nonetheless, the US output gap is projected to unchanged relative to the previous forecast.16 maintain its downward trend, reflecting the impact of the weak, but improving, economic outlook. Figure 6: Comparative US GDP Growth Forecast (Per cent ) Figure 7: US Output Gap (Per cent of Potential GDP)
Source: BOJ, CBO Source: BOJ, CBO For the March 2020 and June 2020 quarters, real output growth in the US is projected at 1.6 per cent The unemployment rate in the US at December 2019 and 1.8 per cent, respectively, influenced by (i) a was 3.5 per cent, the lowest since December 1969 rebound in private investments (including in (see Table 1). This rate was also below the Bank’s housing) influenced by a decline in loan rates, (ii) a projection of 3.7 per cent and the US Federal rebound in net exports as the US increases its Reserve’s estimate of the natural rate of 4.1 per 19 exports to China, and (iii) higher consumer spending cent. Of note, the unemployment rate for the supported by a strong labour market, wage gains, December 2019 quarter was, on average, 3.5 per the US stock market at record high levels as well as cent. The US unemployment rate is projected to reduced uncertainty by consumers.17 remain generally stable over the next eight 20 quarters. The US output gap is estimated to have been positive since the December 2017 quarter and is expected to remain positive up to the June 2022
consumption and investment growth relative to the previous potential GDP. The US output gap is estimated at 0.7 per cent for forecast. Additionally, the escalation in the trade war over the past the December 2019 quarter. couple of years did only minor damage to the US economy. 19 The US economy added 145,000 jobs in December 2019 However, the November 2019 assessment assumed a further 25 following an increase of 256,000 in November 2019. Job growth bps reduction in the US Fed Funds target range, consequently, the has averaged 176,000 per month in 2019, compared with an impact of a tighter monetary policy than previously anticipated is average monthly gain of 223,000 in 2018. In December 2019, likely to provide a partially offsetting impact. notable job gains occurred in retail trade and health care, while 16 The forecast does not assume the significant rebound in US mining lost jobs. Over the last 12 months, average hourly earnings exports to China as agreed in the deal. have increased by 2.9 per cent. 17 The University of Michigan measure of consumer confidence 20 The unemployment rate is projected to end FY2019/20 at 3.5 rose to 99.2 in December, from 96.8, its fourth consecutive per cent, 0.3 percentage point below end-FY2018/19 and end monthly rise. The index is not too far below the 15-year high of FY2020/21 at 3.6 per cent. Non-farm payrolls are projected to 101.4 reached in early 2018. The recovery was driven by a big continue rising in the March 2020 quarter, supported by signs of a pick-up in the current conditions index, to 115.2 from 111.6, while turnaround in hiring in the bigger services sector, with the the expectations index increased to 88.9 from 87.3. composite Market employment PMI rising further in January 2020. 18 The output gap equals the difference between historical or projected GDP and the US Congressional Budget Office’s (CBO) estimate of potential GDP and is expressed as a percentage of
Bank of Jamaica 9 Quarterly Monetary Policy Report February 2020
Table 1: Unemployment Rate for Selected Economies addition, the FOMC signaled no intentions to reduce (Quarterly Average Per Cent) rates in 2020. 24
USA Canada Euro With economic growth stabilising and inflation set to
Sep-17 4.2 6.2 9.1 remain subdued, the Bank anticipates that the Fed Dec-17 4.1 6.0 8.7 will maintain interest rates at their current level for Mar-18 4.0 5.8 8.5 the foreseeable future. 25 Jun-18 4.0 5.9 8.3 Sep-18 3.7 5.9 8.0 Dec-18 3.9 5.6 7.9 Trading Partners’ Inflation Mar-19 3.9 5.8 7.8 Jun-19 3.6 5.5 7.6 The weighted average of 12-month inflation rates Sep-19 3.6 5.6 7.6 for Jamaica’s trading partners’ (TPs) at December Dec-19 3.5 5.7 7.6 2019 is estimated at 2.2 per cent. This estimate is
above the Bank’s previous forecast of 2.0 per cent. Source: Official statistics offices For the US, annual CPI inflation at December 2019
was 2.3 per cent, a 15-month high and an The Federal Reserve has signalled a pause in its acceleration relative to both the previous forecast programme of monetary loosening to stimulate the and the September 2019 outturn.26 The PCE price US economy, following a reduction in policy rates index increased 1.5 per cent on a year-on-year by 75 basis points since mid-2019.21 On 11 basis in November 2019, and has remained below December 2019, the Federal Open Market the Fed’s target of 2.0 per cent since October 2018. Committee (FOMC) announced its decision to maintain the US Fed Funds target range of 1.5 per Over the next eight quarters the Bank projects the cent – 1.75 per cent, in line with Bank of Jamaica’s inflation rate of Jamaica’s main trading partners projection.22 Further, on 29 January 2020, the (TP) to moderate in the range of 1.8 per cent to 2.0 FOMC maintained the US Fed Funds target range.23 per cent, albeit marginally higher than the previous The Federal Reserve deemed the current stance of monetary policy appropriate to support sustained growth and strong labour market conditions and bring inflation near its symmetric 2 percent goal. In
21 The press release statement struck a more upbeat tone with all revised downward by 0.2 pps to 3.5 per cent, 3.6 per cent and officials removing the previous line that “uncertainties about the 3.7 per cent, respectively, relatively to the previous projection round outlook remain”, and confirming their belief that “the current stance in September 2019. The forecast for core was revised downward of monetary policy is appropriate”. by 0.2 pps to 1.6 per cent while the forecast for headline PCE 22 The Federal Reserve’s decision to maintain the policy rate at the inflation was unchanged relative to September 2019. December 2019 meeting was unanimous, following several 25 With signs of improvement in economic activity, and downside dissents in previous meetings. The median projection of the Fed risks from trade policy fading, this supports the view that any further Funds rate was revised downward with rates now expected to policy loosening is unlikely. Further, the Fed Chair reiterated in his remain at their current level throughout 2020 and to rise by only press conference that it would take a “material reassessment” of 25bps in 2021.The dot plot also showed that most officials still the outlook to convince officials to cut rates again. Of note, the expect rates to be increased back above 2.0 per cent further IHS Markit Composite PMI Output Index for the US registered 52.7 ahead. However, the Fed Chairman indicated that it would take a in December 2019, up from 52.0 in November 2019, to signal a significant rise in inflation to convince officials to start tightening moderate expansion in private sector business activity. The upturn again. was the fastest since April 2019. 23 The only change in the accompanying policy statement relative 26 The US CPI index increased 2.3 per cent for the 12 months to December 2019 was that consumption growth is now described ending September 2019, which compares to the previous forecast as "moderate" rather than "strong", reflecting slowdown in of 2.1 per cent. The acceleration in annual CPI inflation for consumption growth. The almost unchanged statement issued at December 2019 was supported by a base effect given the sharp the January 2020 FOMC meeting is interpreted by the market that fall in energy prices in December 2018. The energy sub-index Fed officials currently do not believe the disruption caused by the increased by 3.4 per cent while the food sub-index rose by 1.8 per novel Coronavirus warrants the type of “material reassessment” to cent. Excluding food and energy, core CPI inflation was 2.3 per the economic outlook that would persuade them to resume cutting cent in December 2019, relative to 2.4 per cent reported for rates. September 2019. Core PCE inflation was 1.6 per cent at November 24 Fed officials kept their forecast for economic growth unchanged 2019, a deceleration relative to 1.7 per cent in September 2019. from the September projection. The forecast for the unemployment rate was revised downward by 0.1 percentage points (pps) to 3.6 per cent for 2019, while the forecast for 2020, 2021 and 2022 were
Bank of Jamaica 10 Quarterly Monetary Policy Report February 2020
forecast (see Figure 8).27, 28 The higher TP inflation Bank of Jamaica projects that, over the next eight largely reflects the revised outlook for commodity quarters (March 2020 to December 2021), the prices. Of note, over the next eight quarter, US currencies of Jamaica's major trading partners will inflation is projected to moderate in the range of 1.9 appreciate, on average, against the US dollar (see per cent to 2.0 per cent, albeit marginally higher Figure 9). This projection reflects the continued than the previous forecast. This profile reflects the impact of abating uncertainties about global trading revised outlook for commodity prices and a modest arrangements as well as the accumulation of current rise in imported inflation given the assumption for account and fiscal deficits in the US. Additionally, the depreciation of the US Dollar. progress on Brexit should support the Pound Sterling and the Euro.31 Figure 8: Trade Weighted Trading Partners’ Inflation (12-month Per cent change) Figure 9: Trading Partners’ Trade Weighted Exchange Rate – vis-à-vis USD, May 2013 =100
Source: Bloomberg Source: Bloomberg
Trends in Trading Partners’ Over the March and June 2020 quarters, the Exchange Rates currencies of Jamaica's major trading partners will During the December 2019 quarter, TP currencies appreciate against the US dollar as the easing trade generally appreciated against the US dollar.29 The tensions between the world’s two largest economies weaker US dollar primarily reflected the impact of and reduced uncertainty surrounding Brexit reduces reports of progress in trade negotiations between investors’ appetite for safe-haven assets such as the US and China, which changed investor’s the US dollar.32 preference for safe-haven assets such as the US dollar.30 However, this impact was partially offset by an escalation of geopolitical tensions between the US and the Middle East.
27 The inflation rate of Jamaica’s main trading partners (TP slower pace of depreciation relative to the Bank’s previous forecast inflation) for FY2019/20 is projected at 1.9 per cent, above the for depreciation of 0.6 per cent. previous forecast of 1.6 per cent. 30 The US dollar has benefitted significantly from safe-haven 28 Despite higher import tariffs in some countries, cost pressures demand over the past year amid trade uncertainty in particular. have generally remained subdued. 31 China’s phase-one trade deal with the US as well as the 29 There was an average appreciation of 0.05 per cent in the accommodative policy stance of many central banks will support exchange rate of Jamaica’s trading partners vis-à-vis the USD for increased risk appetite. the December 2019 quarter, following an average depreciation of 32 The Japanese yen is projected to depreciate relative to the US 0.3 per cent in the September 2019 quarter. This compares to the dollar. The yen is widely considered a safe haven currency. On 29 previous forecast for a depreciation of 0.3 per cent for the review January 2020, the European Union gave its formal approval to the quarter. The exchange rates of Jamaica’s trading partners vis-à- UK’s withdrawal agreement, consequently the UK is scheduled to vis the USD depreciated, on average, by 0.2 per cent in the formally leave the bloc on 31 January 2020. December 2019 quarter relative to a year prior. This reflected a
Bank of Jamaica 11 Quarterly Monetary Policy Report February 2020
Terms of Trade about a possible resolution to the first phase of the Jamaica’s terms of trade (TOT) index declined at an US-China trade deal, which reduced investor annual pace of 14.8 per cent at December 2019, concerns about a slowdown in global economic following an increase of 0.2 per cent at September growth and energy demand, (ii) reports of OPEC 2019.33 The decline in the index reflected an and allied nations’ decision to deepen production 36 increase of 5.4 per cent in the import price index cuts effective January 2020 to March 2020 , (iii) (IPI) and a decline of 10.2 per cent in the export geopolitical tensions in the Middle East, and (iv) a price index (EPI). The increase in the IPI emanated depreciation of the US dollar, which increased mainly from increases in the prices for fuel while the investors’ appetite for US dollar dominated decline in the EPI was primarily driven by reductions commodities. Notwithstanding, downward pressure in the prices for alumina and sugar. emanated from reports of rising crude oil inventories 37 and rising crude production in the US. The outturn for the December 2019 quarter reflects a faster pace of decline relative to previous The projected path for crude oil prices over the near projections and was largely attributable to a slower term (March 2020 to December 2021) has been pace of decline in import prices and a faster pace revised upwards, relative to the last forecast. Oil of decline in export prices. prices are projected to average US$56.44 per barrel for the next eight quarters compared to an average 38 Bank of Jamaica projects that Jamaica’s TOT will of US$54.65 per barrel in the previous projection. deteriorate over the next eight quarters (March 2020 This forecast nonetheless implies that the average quarter to the December 2021 quarter). The TOT is of the quarter-over-quarter change in crude oil projected to deteriorate over the March and June prices for the period has been revised to a decline 2020 quarters, primarily due to reductions in export of 0.3 per cent, compared with an average quarter- prices, driven by alumina.34 over-quarter increase of 0.4 per cent previously 39 anticipated.
Commodity Prices For the March 2020 and June 2020 quarters, oil The daily average of West Texas Intermediate crude prices are projected to average US$60.40 per barrel oil prices for the December 2019 quarter increased (6.0 per cent increase for the quarter) and US$58.67 by 0.9 per cent relative to the September 2019 per barrel (2.9 per cent decline for the quarter), quarter but declined by 3.2 per cent relative to the respectively, which compares to quarterly averages 35 December 2018 quarter. The increase in crude oil of US$53.72 and US$54.04 in the previous prices, relative to the previous quarter, mainly projection (see Figure 10). 40. The projected increase emanated from (i) investors continued optimism
33 At the November 2019 assessment, the EPI for September 2019 37 According to the US Energy Information Administration’s January was estimated to have declined by 8.7 per cent relative to a year 2020 Short-Term Energy Outlook (STEO), annual average US prior. However, the latest estimate for September 2019 indicates crude oil production reached a new record of 12.2 million b/d in that the EPI declined at an annual pace of 9.0 per cent. 2019, up 1.3 million b/d from 2018. EIA forecasts U.S. crude oil 34 In particular, the TOT is projected to decline at an annual rate of production to average 13.3 million b/d in 2020 and 13.7 million 23.7 per cent and 12.1 per cent in the March and June 2020 b/d in 2021. quarters, respectively. 38 Oil prices are anticipated to decline by 7.0 per cent for 35 In the previous projection the Bank projected the daily average FY2019/20 to average US$58.41 per barrel, compared to an of West Texas Intermediate crude oil prices for the December 2019 average of US$55.88 per barrel in the previous projection. quarter to decline by 5.2 per cent relative to the September 2019 39 The average of the quarter-over-quarter decline in crude oil quarter. prices for the March 2020 to December 2021 assumes a decline 36 On 06 December 2019, OPEC and a group of other oil producers only in the June 2020 to March 2021 quarters. Subsequently, there announced they were deepening the production cuts originally is a moderate upward trend in prices. Despite the assumption an announced in December 2018. The group is now targeting average quarter-over-quarter decline in crude oil prices, prices production that is 1.7 million b/d lower than in October 2018, remain above the previous forecast until the December 2020 compared with the former target reduction of 1.2 million b/d. OPEC quarter. announced that the cuts would remain in effect through the end of 40 Subsequent to the forecast, on 22 January 2019 downward March 2020. pressure emanated from investors’ reaction to reports of a spread
Bank of Jamaica 12 Quarterly Monetary Policy Report February 2020
in crude oil prices for the March 2020 quarter is among major economies as well as the spread of underpinned by (i) OPEC and allied nations’ the novel Coronavirus could hurt the recovery in decision to cut production by 0.5 million barrels per global trade, reduce confidence and investment day and (ii) market expectations that global worldwide, hence reducing the demand for economic conditions in 2020 will be better than commodities. Generally, weaker than expected previously anticipated given easing trade tensions growth in advanced and emerging market between the US and its trading partners. For the economies could result in a fall in oil prices. June 2020 quarter, the projected decline in oil prices Conversely, upward pressures may emerge if OPEC reflects the assumption of an emergence in excess and non-OPEC oil producers continue to reduce supply conditions in a context where non-OPEC supply on the global market beyond the extended producers will increase oil supply which will more March 2020 deadline.42 In addition, further than offset forecast supply declines from OPEC escalation of geopolitical tensions in the Middle East members.41 could lead to a rise in prices. 43
Figure 10: Trend in Average WTI Crude Oil Prices Average grains prices for the December 2019 quarter increased by 4.0 per cent, relative to the September 2019 quarter (an increase of 0.3 per cent on an annual basis).44 This increase was associated with higher prices for wheat (10.0 per cent increase for the quarter, 1.7 per cent increase on an annual basis) and soybean (3.5 per cent increase for the quarter, 1.4 per cent decrease on an annual basis), which was partially offset by lower prices for corn (1.9 per cent decrease for the quarter, 2.5 per cent increase on an annual basis). Sources: Bloomberg The general increase in grains prices for the quarter
reflected the impact of easing trade tensions.45
The risks to the forecast for oil prices are skewed to the downside. In relation to the downside risks (that The average price of grains is projected to decline is oil prices could track below the forecast), OPEC at an average quarter over quarter rate of 0.7 per and allied nations’ failure to meet production cuts cent over the next eight quarters (March 2020 to and higher than anticipated increases in US crude December 2021), a rate that is below that in the 46 supplies could result in downward price pressures. Bank’s previous forecast. Notwithstanding this, Additionally, an escalation of trade restrictions average grains prices over the period are higher
of the novel Coronavirus in China, increasing investors’ concerns particularly increased uncertainty around potential disruptions to oil about a possible slowdown in the global economy and energy production and shipping in the Middle East, added volatility and an demand. Of note, prices declined to US$50.11 per barrel on 03 additional risk premium to global oil prices in the short term. February 2020, the lowest price since 08 January 2019. However, this risk premium has fallen in light of reduced tensions 41 In their January 2020 outlook, EIA assumed that OPEC will limit but could rise if tensions reemerge. production through all of 2020 and 2021 to target a relatively 44 The Bank projected a decline of 0.9 per cent for the December balanced global oil market. The BOJ has incorporated this profile 2019 quarter relative to the September 2019 quarter. for global oil supplies in the forecast, therefore assuming that the 45 Wheat prices were further supported by weather-driven deal will be extended beyond 01 April 2020. expectations of lower crops in key exporting countries such as as 42 OPEC and its allies have held preliminary discussions about Argentina, Australia and, Russia. making deeper cuts in oil production if the corona virus leads to a 46 The previous forecast assumed an average quarter over quarter further fall in global demand for oil. decline of 0.4 per cent over the March 2020 to December 2021 43 In December 2019, senior Iranian military official was killed in a quarter. The current forecast assumes a much larger decline in US airstrike in Baghdad, Iraq. The Supreme Leader of Iran warned prices during the September and December 2020 quarters given that a “harsh retaliation is waiting” for the US following the attack. the assumption of excess supplies. Subsequently, the US Department of State warned American citizens to leave Iraq immediately and closed the embassy in Baghdad. More recently, on 03 January 2019, events in Iraq,
Bank of Jamaica 13 Quarterly Monetary Policy Report February 2020 relative to the previous forecast. This projected External Financial Markets increase in prices relative to the previous forecast The performance of GOJ’s sovereign bonds spreads mainly reflects investor’s outlook for increased on the international market over the December 2019 demand of grains, particularly soybeans, as well as quarter was mixed relative to the previous increased concerns about a shortage of supplies.47 projection. The average of the daily spreads The average price of grains over the March 2020 and between the indicative yield on Government of June 2020 quarters is projected to increase at an Jamaica global bonds (GOJGBs) and the yield on average quarter over quarter rate of 1.4 per cent US Treasury Bills, improved (declined) by 29 basis (see Figure 11). This projected increase mainly points (bps) while the average of the daily spreads reflects renewed investor optimism about trade between the indicative yields on GOJGBs and the negotiations between the US and China, and a yield on the EMBI+ deteriorated (increased) by 29 depreciation of the US dollar, increasing the bps, when compared to the same measure for the demand for dollar denominated commodities. September 2019 quarter.48, 49 The average of the
daily spreads between the indicative yield on Figure 11: Trend in Average Grains Prices GOJGBs and the yield on US Treasury Bills were projected to decline by 16 bps while the average of the daily spreads between the indicative yields on GOJGBs and the yield on the EMBI+ were projected to increase by 10 bps (see Figure 12). 50, 51, 52
Figure 12: Average International Bond Spreads
Sources: Bloomberg
Sources: Bloomberg,
47 Of note, in January 2020, the Russian agriculture ministry was the quarter, which increased investors’ appetite for riskier emerging considering a non-tariff quota for grain exports of 20 million tonnes market bonds. GOJ bond yields further benefited from Moody’s from January to June 2020. The ministry noted that food security upgrade of Jamaica's government ratings to B2, with the outlook is a priority therefore it is important that favorable external assessed as stable. conditions do not lead to grain shortages on the domestic market. 52 Of note, on 11 December 2019, Moody's Investors Service 48 For the quarter, relative to US Treasury Bill yields and EMBI+, ("Moody's") upgraded the Government of Jamaica's long-term these spreads were 274 bps and negative 85 bps, respectively. issuer and senior unsecured ratings to B2 from B3, and senior 49 In July 2019 JPMorgan began cutting Venezuela’s sovereign and unsecured shelf rating to (P)B2 from (P)B3. The outlook has been state oil firm PDVSA’s bonds to ‘zero weight’ in its EMBI Global changed to stable from positive. The key drivers of rating upgrade Diversified, EMBI Global and EMBI+ indices. The phasing-out were (i) Jamaica's strong commitment to fiscal consolidation and process started on 31 July 2019 and was completed by 29 structural reforms portends to continued decline in government November 2019. As at 08 July 2019 the weighting of Venezuelan debt and sustained improvements in economic resiliency, and (ii) bonds in JPMorgan’s EMBI Global Diversified, EMBI Global and improving debt structure limits risks associated with a high levels EMBI+ indices was 0.5 per cent, 0.9 per cent and 1.2 per cent, of government debt. The stable outlook reflects Moody's respectively. As a result of weighting cut, JP Morgan estimated the expectations that the improvements in Jamaica's credit profile, average yields on the EM indices would decline by about 45 basis which have improved macroeconomic stability and put debt on a points. downward trend, will be sustained. The stable outlook also reflects 50 The spread for the December 2019 quarter, relative to US the structural credit constraints due to the country's small size, Treasury Bill yields, were projected to be 286 bps while the spread sizeable economic concentration in the tourism industry, low relative to the EMBI+ was projected at negative 106 bps. economic growth and vulnerability to external shock. 51 Sovereign bond yield spreads (including Jamaica’s) were positively impacted by the reports of easing trade tensions during
Bank of Jamaica 14 Quarterly Monetary Policy Report February 2020
resolution in trade tensions between the US and In the context of the performance of the GOJ yield China, that would avert the imposition of new tariffs spreads over the quarter, there were respective and improve the prospects for global economic declines of 28 bps and 58 bps in the average yields growth.54 on GOJGBs and EMBI+, while there was an increase of 1 bp in the average yield on US Treasuries (see Additionally, equity markets benefitted from reports
Figure 13). which eased investors’ concerns about a slowdown in global growth, including: (i) the US Congressional
Figure 13: Average International Bond Yields approval of the US-Mexico-Canada (USMCA) trade (Per cent) agreement, (ii) the release of strong economic data
from the US and China, (iii) a more accommodative posture by central banks and (iv) easing concerns about a no-deal Brexit following the success of UK’s Conservative Party in UK general elections and subsequent passing of the UK Prime Minister’s Withdrawal Agreement.
Figure 14: Selected Stock Market Indices Sources: Bloomberg, (Quarter–over-Quarter Per cent) GOJ bond yields are expected to be positively impacted over the forecast horizon as improved trade relations between the US and its trading partners reduce demand for relatively safer assets. Additionally, there remains continued confidence in the country’s positive economic performance.53 Of note, GOJ bond yields will benefit from loose monetary policy in the US. Jamaica’s sovereign bond yields are projected to decline over the next eight quarters.
Source: Bloomberg Global Stock Market The performances of selected global stock market indices during the December 2019 quarter were strong. Relative to the September 2019 quarter, the Dow Jones Industrial Average (DJIA), S&P 500, the Eurofirst 300 and the FTSE 100 advanced by 6.0 per cent, 8.5 per cent, 5.1 per cent and 1.8 per cent, respectively (see Figure 14). The continued rebound in the equity market in the December 2019 quarter occurred in the context of hopes of progress for a
53 It is anticipated that confidence in the Jamaican economy will 54 In October 2019 the US President announced that both sides continue in the context of the country’s commitment to maintain agreed to the outlines of a “phase one” deal in which the US would the positive performance which was evidenced under the EFF and suspend planned tariff increases in return for increased purchases SBA programme with the IMF, resulting in a favourable impact on of US agricultural goods by China, along with unspecified GOJGBs. provisions regarding protection of intellectual property and access for financial services firms.
Bank of Jamaica 15 Quarterly Monetary Policy Report February 2020
3.0 Real Sector Real GDP is estimated to have increased marginally in the December 2019 quarter, a slow-down when compared to the expansion in the September 2019 quarter. This growth mainly reflected an increase in consumption (private and government) spending, partly offset by a decline in net exports. Investment spending remained generally unchanged. From the perspective of aggregate supply, there was estimated growth in most industries for the review quarter, with the exception of Mining & Quarrying and Construction. The deceleration in GDP growth relative to the previous quarter reflected estimated lower value added for Mining & Quarrying, although growth in Manufacture and Electricity & Water was relatively higher.
GDP Growth and Output Gap output gap for the quarter was larger than the gaps in the June 2019 and September 2018 quarters.3 The Jamaican economy is estimated to have grown in the range of -0.5 per cent to 0.5 per cent for the December 2019 quarter, below the 0.6 per cent Aggregate Supply recorded for the September 2019 quarter and the All industries are estimated to have grown for the previous projection of 0.4 per cent. The estimated December 2019 quarter, except for Mining & growth for the quarter chiefly reflected expansions Quarrying and Construction. The growth for the in Agriculture, Forestry & Fishing, Finance & quarter chiefly reflected expansions in Finance & Insurance Services and Hotels & Restaurants with Insurance, Agriculture, Forestry & Fishing and higher than previously projected growth being Hotels & Restaurants (see Table 2). estimated for Manufacture, Electricity & Water and
Other Services and to a lesser extent Agriculture. Finance & Insurance Services is estimated to have The upward revision to Manufacture largely reflects increased for the December 2019 quarter. This a larger than previously anticipated growth in Food, expansion largely reflected growth in all sub- Beverage & Tobacco predicated on higher growth in industries, particularly insurance services. food production (excluding sugar).1 The revision to
Other Services largely reflected higher growth in The estimated expansion in value added for recreational, cultural & sporting activities associated Agriculture, Forestry & Fishing largely reflected with tourism. In contrast, a larger decline in Mining growth in domestic crop production as traditional & Quarrying is estimated consequent on a reduction export crops largely remained unchanged. With in capacity utilization at the two operating alumina regard to domestic crops, the increase is largely plants.2 Additionally, Construction is now estimated predicated on growth in root crops. In contrast, to have declined relative to previous forecast of animal farming is estimated to have declined given growth being flat. the reduction in broiler production. For traditional
export crops, the growth largely reflects an increase In the context of the growth for September 2019 in banana production supported by a rebound in quarter, Bank of Jamaica estimates that a negative
1 The revision reflected the trend increases in several food drying alumina while the latter reflected information that the quality categories including meat & meat products, processing of fruits of bauxite mined by the plant is sub-optimal. & vegetables, dairy products, bakery products and beverages 3 The output gap is the difference between real GDP and the indicated by STATIN for the September 2019 quarter. potential output. Expressed in percentage form, the output gap 2 The Ewarton alumina plant in particular was faced with operational measures the deviation of real GDP from its potential as a fraction challenges as well as constraints in output quality. The former was of potential output. due to the malfunctioning of the plant’s kiln which is necessary for
Bank of Jamaica 16 Quarterly Monetary Policy Report February 2020
cocoa and coffee. This impact is expected to be Figure 15: Trend in Visitor Days (12-Month Per partly offset by the lower production of sugar cane. cent change)
Table 2: Industry Contribution to Growth (September 2019 Quarter) Contribution Growth (%) (%) GOODS -836.6 -4.0 to -3.0 Agriculture, Forestry & Fishing 257.2 3.5 to 4.5 -43.0 to - Mining & Quarrying -1097.7 44.0 Manufacture 107.6 1.0 to 2.0 Construction -103.6 -1.0 to -2.0
SERVICES 936.6 1.0 to 2.0 Electricity & Water Supply 69.8 2.0 to 3.0 Wholesale & Retail Trade, Repairs & Source: The Jamiaca Tourist Board Installation 163.0 0.5 to 1.5 Hotels & Restaurants 133.2 2.0 to 3.0 The expansion in Manufacturing for the review Transport Storage & Communication 109.8 1.0 to 2.0 quarter largely reflected growth in both Food, Financing & Insurance Beverages & Tobacco and Other Manufacturing. Services 323.0 2.5 to 3.5 Food, Beverages & Tobacco is estimated to have Real Estate, Renting & grown consequent on an increase in food and Business Activities 95.3 0.5 to 1.5 Producers of Government beverages production. Growth in Other Services 33.3 0.0 to 1.0 Manufacturing is associated mainly with increased Other Services 110.4 1.0 to 2.0 cement production during the quarter.5 Financial Intermediation Services Indirectly Measured 101.2 2.5 to 3.5 Source: Bank of Jamaica Electricity & Water Supply is estimated to have increased in the review quarter. This growth Similar to the expansion in the September 2019 reflected increases in both electricity consumption quarter, value added for Hotels & Restaurants is (proxied by total electricity sales) and water estimated to have increased in the December 2019 consumption during the period. The increase in quarter (see Figure 15). This growth is premised on water consumption during the period may be an estimated increase of 2.4 per cent in foreign associated with an improvement in the dry national arrivals, notwithstanding a fall in the conditions, which prevailed in the previous quarter. average length of stay of visitors.4 The increase in foreign national arrivals largely reflected the effects Following a reduction in the September 2019 of new flights. quarter, value added for Mining & Quarrying is estimated to have declined significantly for the December 2019 quarter. The estimated reduction for the review quarter reflected declines in both alumina and bauxite production (see Figure 16). Alumina production was affected by operational challenges at both plants, which adversely impacted
4 The phenomenon of a decline in the length of stay of visitors is who generally stay for shorter periods, relative to visitors from attributable to an increasing share of visitors from North America Europe. 5 Petroleum refining is estimated to decline in the quarter.
17 Quarterly Monetary Policy Report February 2020 capacity utilisation during the quarter. The decline in was mainly attributed to Mining & Quarrying while bauxite production and exports was due to low growth in the non-tradable sector was chiefly demand in the quarter. associated with Finance & Insurance Services.
Figure 16: Trends in Crude Bauxite, Alumina & Total Figure 17: National Housing Trust Housing Starts Bauxite Production (12-Month Per cent Change) & Completion (12-Month Per cent change)
Source: The National Housing Trust
Source: Jamaica Bauxite Institute
Construction is estimated to have declined for the Aggregate Demand review quarter. This performance was largely driven From the perspective of aggregate demand, there by a reduction in works under the Government’s were also indications that the growth in spending for MIDP programme, which was not countered, as the December 2019 quarter was low. This estimate earlier expected, by the start-up of the new South mainly reflected a fall in net exports, partly offset by Coast Highway Improvement Project (see Figure an increase in private consumption.6 Investment 17). spending was estimated to remain generally flat for the quarter, which was lower than previously Given the above changes, non-tradable industries anticipated. The estimate for investment spending are estimated to have expanded for the review occurred in the context of the expansion in private quarter while the tradable sector is estimated to sector financing through deposit taking institutions 7, 8 9 have contracted. The decline in the tradable sector which was offset by a decline in FDI inflows. ’
6 The growth in consumption is inferred from the lagged increase Catherine and Montego Bay during the quarter, as well as the in GCT on imports. This is also consistent with the means of development of warehouse space by a leading distributor of payment data, which continues to increase, albeit at a building materials. Additionally, a major producer of baked decelerating pace. products is constructing three distribution centers and a production 7 The estimate for investment spending for the December 2019 plant. Further, there was investment in an agro-park by a major quarter reflects increases in private domestic investment, which is food processor. Real FDI is estimated to have declined by 9.3 per partly offset by a decline in real FDI and GOJ’s capital expenditure. cent, following a reduction of 7.1 per cent in the previous quarter GOJ’s capital expenditure is estimated to decline in the quarter, and an average decline of 18.0 per cent over the last four quarters. similar to the decline for the preceding quarter consequent on the The reduction in FDI for the review quarter largely reflected lower winding-down of the government’s programme of road spending on mining/energy and infrastructure activities, partly rehabilitation. Notably, loan inflow from China EXIM Bank was offset by an increase in expenditure on tourism-related projects. received in November 2019 related to the South Coast Highway 8 Over the past four quarters (December 2018 to September 2019), Improvement Project, although reports suggest that the execution there were average increases of 14.8 per cent and 23.5 per cent, of this programme is occurring at a slower than anticipated pace. respectively, in total credit of deposit-taking institutions and Private domestic investment, which reflects the level of spending corporate issues. on investment goods after the influence of FDI and government 9 While the relationship between credit growth and investment has capital expenditure have been taken into account, is estimated to been weak in the past, this relationship has strengthened since have grown during the quarter given a stream of projects that have 2015. The correlations between gross capital formation materialized. These projects include the construction of houses by major developers at Phoenix Park, St. Catherine, Inswood, St.
18 Quarterly Monetary Policy Report February 2020
The deterioration in net exports was due largely to The projected growth in the economy is reflective of an estimated fall in exports, particularly alumina, as accommodative monetary conditions over the well as higher imports for the quarter (see Balance forecast horizon (see Monetary Conditions). In of Payments). addition, the outlook for demand in the US has been revised marginally upwards relative to the previous Labour Market Developments forecast (see International Economy) even while the domestic fiscal stance remains contractionary. Jamaica’s unemployment rate (UR) at October 2019 fell to 7.2 per cent, 1.5 percentage points (pps) Beyond December 2021, projected GDP growth is below the rate at October 2018. The fall in the UR largely in line with the previous projection. This reflected growth of 2.4 per cent (29,200) in the growth reflects the impact of the reopening of the employed labour force, combined with an increase Alpart plant. The plant is expected to operate after of 0.8 per cent (10,200) in the labour force. In this re-opening at an average capacity utilization rate of context, the number of unemployed persons 76.0 per cent. This growth impetus is expected to declined by 16.4 per cent, while the labour force be supported by tourism and manufacture. participation rate increased by 0.5 pps to 64.5 per cent. In the context of the projections for GDP growth, the
output gap is projected to narrow over the forecast Bank of Jamaica projects that labour market horizon. This projection reflects an output gap that conditions will improve further over the next eight is largely in line with previous assessment, quarters. In this regard, the average unemployment notwithstanding an improved outlook for external rate over the March 2020 to December 2021 demand in the USA (see Figure 15). In the context quarters is projected to decline to 6.9 per cent, of the output gap projections, minimal inflationary relative to the 7.7 per cent over the past year. The pressures from demand conditions are anticipated employed labour force is projected to increase (year (see Labour Market Developments for supporting over year) at an average rate of 0.8 per cent per information). quarter, respectively even while the labour force is projected to reman generally flat. The growth in employment is expected to provide a fillip for wage increases, which may lay the basis for higher inflation in the future.
The anticipated continued moderation in the unemployment rate over the medium term remains broadly in line with the previous projection. The expected improvement reflects employment growth in manufacturing, finance & insurance and business process outsourcing.
Outlook Real GDP is projected to trend upwards at an average quarterly rate in the range of 0.5 per cent to 1.5 per cent over the March 2020 to December 2021 quarters but remain below potential output.
(investment) and total business lending, personal lending and total to 2017. However, since 2015 the correlations are positive and private sector lending were negative and low over the period 2007 high.
19 Quarterly Monetary Policy Report February 2020
4.0 Fiscal Accounts For the 12-month period to December 2019, Central Government’s operations recorded a fiscal surplus of $29.3 billion (1.4 per cent of GDP), relative to the surplus of $26.6 billion (1.3 per cent of GDP) for the similar period of 2018. The 12-month primary surplus at December 2019 was $158.6 billion (7.4 per cent of GDP), compared to $155.0 billion (7.7 per cent of GDP) at December 2018.
The GOJ continues to be committed to maintaining its primary surplus and public sector overall balance targets under the economic programme. In this context, any slippages in the fiscal accounts will be offset by expenditure containment and/or improved revenues.
Recent Developments Lower expenditure during the review period was evident in all areas of spending, except Fiscal policy showed signs of being more restrictive programmes when compared to the similar period over the review period. For the 12-month period to of 2018. Notably, compensation of employees was December 2019, Central Government’s operations in line with expectation. The higher programme recorded a fiscal surplus of $29.3 billion (1.4 per spending was due to greater allocations for road cent of GDP), which was higher than the surplus of improvement, disaster mitigation and payments of $26.6 billion (1.3 per cent of GDP) for the arrears as well as losses for at-risk public bodies. corresponding period of the previous year. The 12- Lower capital expenditure was due to slower month primary surplus at December 2019 was execution of work under the Major Infrastructure $158.6 billion (7.4 per cent of GDP), compared to Development Programme. $155.0 billion (7.7 per cent of GDP) for the similar period of 2018. The fiscal outturn for the review The financing requirement for Central Government period reflected a slower pace of growth in both for the 12-month period to December 2019 was revenues & grants and expenditure relative to the $136.3 billion (6.3 per cent of GDP) reflecting the corresponding period of 2018. fiscal surplus noted above and amortization of 2 $165.6 billion (7.8 per cent of GDP). In addition, The performance of Revenues & Grants for the 12- Central Government reimbursed $3.3 billion (0.2 per month period to December 2019 was largely cent of GDP) to Bank of Jamaica for operating attributable to higher tax receipts, relative to the losses incurred in previous years and made comparable period of 2018. The growth in tax payments of $11.0 billion (0.5 per cent of GDP) revenues emanated from all categories of revenues towards the recapitalization of Bank of Jamaica. (international trade, production & consumption and The Government also extended a loan of $1.1 billion income & profit).1 (0.1 per cent of GDP) to the Port Authority of Jamaica and repurchased Petrojam shares from
1 Production & consumption receipts largely reflected greater higher employment levels, while increase in compliance drove the inflows from GCT (local) and SCT (local). The improvement in GCT outturn for other companies. Lower tax refunds and greater (local) was due to greater tax compliance and consumption. Higher transactions in the secondary bond market supported the growth than projected domestic production of refined fuel drove the in tax on interest. Of note, among the tax items that registered outturn for SCT (local). Greater intake from GCT (imports), declines was stamp duty which reflected a reduction in rates that customs duty and travel tax facilitated the increase in international was effected on 01 April 2019. Grants receipts during the period trade receipts. The increases were supported, in part, by higher declined due to administrative delays associated with projects that imports, a more depreciated exchange rate and increased visitor were financed by grants flows. Non-tax revenue reflected lower arrivals to the Island. With regard to income & profits, the outturn dividend transfers from public entities. was attributable to greater revenues from PAYE, companies’ profit 2 Higher amortization due to the buy-back of PCDF holdings of taxes and tax on interest. The inflows from PAYE were related to GOJ bonds of US$235.0 million.
Bank of Jamaica 20 Quarterly Monetary Policy Report February 2020
Petróleos de Venezuela for $2.7 billion (0.1 per cent Table 3: Summary of Fiscal Operations (per cent of of GDP). GDP)Table 12: Summary of Fiscal Operations (per cent of GDP) 4 Quarters Sum The above noted expenses were financed by Dec-19 Dec-18 Diff domestic and external loan receipts of $61.3 billion Revenue & Grants 30.5 30.5 (0.1) o/w Tax Revenue 26.7 26.3 0.4 (2.8 per cent of GDP) and $49.9 billion (2.1 per cent Non- Tax Revenue 3.4 3.5 (0.2) of GDP), respectively. For domestic loans, six Grants 0.4 0.5 (0.1) benchmark investment notes (BINs) amounting to Expenditure 29.1 29.2 (0.1) Programmes 10.3 10.0 0.3 $24.7 billion (1.1 per cent of GDP) were issued to Compensation of Employees 9.9 9.9 (0.0) the domestic capital market during the period while Interest Payment 6.1 6.3 (0.3) $3.3 billion (0.2 per cent of GDP) was issued directly Capital Expenditure 2.9 3.0 (0.2) Fiscal Surplus/Deficit 1.4 1.3 0.1 to BOJ. In addition, Treasury bills issuances Primary Balance 7.4 7.7 (0.2) amounted to $22.2 billion (1.0 per cent of GDP). Current Balance 3.8 3.6 0.2 External loan receipts included US$70.0 million (0.5 Total Financing 5.0 5.9 (0.9) per cent of GDP) and US$43.6 million (0.3 per cent External Loans 2.1 1.8 0.3 Domestic Loans 2.9 4.1 (1.2) of GDP) from bi-lateral and multi-lateral agencies Other Inflows 4.5 0.7 3.8 for investment projects, respectively, as well as Other Outflows 1.4 1.8 (0.4) US$55.0 million (0.3 per cent of GDP) and US$6.6 Amortisation 7.8 7.1 0.6 External 4.5 2.5 2.0 in policy-based loans and project loans from the Domestic 3.3 4.6 (1.3) Inter-American Development Bank, respectively. Overall Balance 1.7 (1.0) 2.7 Further, there was other income of $95.3 billion (4.4 Source: Ministry of Finance & the Public Service per cent of GDP) representing loan repayments on credit extended by the PetroCaribe Development Fund (PCDF) and other public bodies. In addition, Near Term Outlook Petrojam returned US$100.0 million and US$156.8 Central Government is expected to continue its million was received as net proceeds from the policy of fiscal consolidation over the near-term as liability management operation on the debt stock in well as maintain its commitment to a primary September 2019. Against this background, there surplus and public sector overall balance targets as was a build-up of $36.7 billion (1.7 per cent of GDP) indicated under the economic reform programme. in Central Government bank balances.
Domestic amortization for the 12-month period to December 2019 included a fixed rate BIN of $40.5 billion (1.9 per cent of GDP) and two variable rate BINs of $8.4 billion (0.4 per cent of GDP and 0.01 billion (0.01 per cent of GDP), respectively. Maturing Treasury bills and commercial bank loans amounted to $20.4 billion (1.0 per cent of GDP) and $2.0 billion (0.1 per cent of GDP), respectively. External amortization included payments of US$196.0 million (1.2 per cent of GDP) and US$90.9 million (0.6 per cent of GDP) to multi-lateral and bi-lateral lending agencies, respectively. In addition, US$86.8 million (0.6 per cent of GDP) was paid on GOJ amortizing global bonds, US$235.0 million for the buy-back of PCDF holdings of GOJ bonds and US$30.1 million (0.2 per cent of GDP) on loans from international commercial banks.
Bank of Jamaica 21 Quarterly Monetary Policy Report February 2020
5.0 Balance of Payments The most recent data (September 2019 quarter) indicate that the current account deficit (CAD) recorded an improvement relative to the September 2018 quarter, in contrast to a projected deterioration.1 However, the CAD is expected to be marginally above the previous projection for the December 2019 quarter. Over the next eight quarters March 2020 to December 2021, the CAD is projected to remain broadly consistent with the previous forecast.
Recent Developments cent of GDP), US$2.0 million below the previous The current account deficit (CAD) of Jamaica’s projection and US$3.0 million below (better than) balance of payments for the September 2019 the CAD for the December 2018 quarter. This quarter amounted to US$141.8 million (0.9 per cent improvement, relative to the previous year, is of GDP), US$51.8 million lower (better), relative to reflected primarily in the income and services sub- the CAD for the September 2018 quarter. This accounts, partially offset by deterioration in the improvement was reflected in the services and merchandise trade balance. The merchandise trade income sub-account, partially offset by a balance is estimated to have worsened due to lower deterioration of the merchandise trade balance. alumina exports in the context of the closure of 4 Relative to the Bank’s projection, the CAD was lower Alpart in October 2019. In addition, alumina prices by US$95.3 million. The variance in the CAD was fell by 29.9 per cent for the December 2019 quarter, largely underpinned by a lower than projected relative to the December 2018 quarter . In contrast, deterioration in the merchandise trade balance as the estimated improvement on the income account well as a stronger than projected improvement on reflects lower profit repatriation by direct investment the services sub-account. For the merchandise companies while the services balance is estimated trade balance, imports (f.o.b) were US$74.1 million to improve due to higher visitor expenditure and 5 below projections while exports were higher by stop-over arrivals. Relative to projections, the US$9.0 million.2 Tourism inflows were above variance in the CAD was underpinned by a lower projections, mainly reflecting higher than projected than projected deficit on the income account of US$ average daily expenditure. 21.4 milllion and a stronger than projected surplus on the services balance of US$13.9 million partially Within the Financial Account, Foreign Direct offset by a higher than projected deficit on the Investment (FDI) inflows were US$12.8 million merchandise trade balance. . higher than projected mainly due to higher than expected expenditure in the mining sector.3 The CAD for FY2019/20 to FY2021/22 is assessed to remain broadly sustainable. The projected CAD For the December 2019 quarter, the CAD is of 2.3 per cent of GDP for FY2021/22 compares estimated to amount to US$85.1 million (0.5 per favourably to respective norms of 3.3 per cent of
1 For the June 2019 quarter, Jamaica’s current account of the Balance of Payments (BOP) recorded a deficit of 0.2 per cent of GDP. This was 0.1 percentage points lower than the previous estimate in November 2019. The revised estimate was underpinned by a downward adjustment to the Income account reflecting the impact of lower profit repatriation.
2 Relative to the corresponding period of the previous year, imports of machinery and transport, chemicals and manufactured goods declined by US$48.5 million (12.4 per cent), US$39.3 million (19.8 per cent) and US$31.9 million (14.8 per cent), respectively. Exports were higher than previously projected, primarily due to higher than expected non-traditional exports of US$12.2 million, particularly mineral fuels. 3 The estimate of capital expenditure at JISCO amounted to US$50.0 million relative to a forecast of US$15.0 million. 4 Alumina production at Alpart for the December 2019 quarter was 0 tonnes relative to 197,786 tonnes of alumina in the corresponding period of the previous year. 5 Alumina production at Windalco for the December 2019 quarter was 101,018 tonnes relative to previous projection of 131,250 tonnes.
Bank of Jamaica 22 Quarterly Monetary Policy Report February 2020
GDP and 4.2 per cent of GDP for the external services sub-account in the context of buoyant sustainability and macroeconomic balance growth in tourism inflows. approaches (see Figure 18).6 Importantly, the current account balance, after accounting for FDI- Figure 20: Medium-Term CAD Forecast (% GDP) related imports, reflects an average surplus of 1.5 per cent of GDP for the 3-year forecast period of FY2019/20 to FY2021/22 (see Figure 19).
Figure 18: Current Account Sustainability Measures (% of GDP)
Source: Bank of Jamaica
Source: Bank of Jamaica
Figure 19: Current Account less FDI (% of GDP)
Source: Bank of Jamaica
The CAD (as a per cent of GDP) is projected to improve over the medium-term, relative to the previous forecast. The CAD is projected to average 2.0 per cent of GDP between FY2019/20 and FY2023/24, relative to the previous forecast of 2.2 per cent of GDP (see Figure 20). The expected improvement is due to a higher surplus on the
6 The external sustainability measure, which is at the top of the range, is highly volatile since it reflects both inflation and exchange rate changes.
Bank of Jamaica 23 Quarterly Monetary Policy Report February 2020
6.0 Monetary Policy & Market Operations BOJ maintained its signal rate during the December 2019 quarter at 0.50 per cent. This decision was based on the Bank’s view that monetary conditions are generally appropriate to support inflation remaining within the target range of 4.0 per cent to 6.0 per cent over the medium term.
In order to ensure the orderly functioning of the foreign exchange market during the December 2019 quarter, BOJ sold US$140.0 million via the B-FXITT flash sale operation. Notwithstanding the B-FXITT flash sale operations, Jamaican dollar liquidity was slightly more buoyant during the December 2019 quarter, relative to the preceding quarter.
BOJ maintained its signal rate at 0.5 per cent, absorbed $6.0 billion, some $1.0 billion below effective 23 December 2019.1 However, money projection. GOJ operations, however, net absorbed market rates increased for the December 2019 $22.7 billion from the system during the quarter, quarter, reflective of tightened liquidity in the final which was $7.9 billion weaker than projected. month of the quarter, while yields on GOJ treasuries fell. Bank of Jamaica conducted 13 auctions of 30-day CDs during the review quarter. The average offer size during the December 2019 quarter was $10.4 Liquidity Conditions billion, below the average of $12.3 billion for the Liquidity conditions during the December 2019 September 2019 quarter. The decline reflected a quarter were slightly more buoyant, relative to the slight unwinding to address liquidity shortage September 2019 quarter. This was indicated by the following special OMO operations in the previous maintenance by deposit-taking institutions (DTIs) of quarter. Notwithstanding, the average yield on the average current account balances at Bank of 30-day CDs for the review quarter was 1.05 per Jamaica of $42.9 billion, above the average of cent, 98 bps below the average for the September $41.6 billion for the preceding quarter. 2019 quarter.
Liquidity conditions over the December 2019 quarter BOJ continued to offer its weekly 14-day repos via were, however, somewhat less buoyant relative to competitive auctions during the December 2019 the previous projections. DTI’s average current quarter. Liquidity provided via 14-day repos during account balances for the quarter were lower than the quarter averaged $7.0 billion relative to $3.9 projected by $1.6 billion. A net injection of $24.0 billion in the September 2019 quarter. A total of 12 billion through BOJ operations during the December auctions were held during the review period, which 2019 quarter was $9.4 billion lower than projected was in line with the previous quarter. Offers received (see Table 4). This largely reflected an injection from full subscription and reflected an average rate of BOJ FX operations of $19.3 billion, which was $11.2 1.34 per cent, 10 bps below the average for the billion below projection.2 Conversely, injection from preceding quarter. OMOs of $10.7 billion was $2.8 billion stronger than anticipated reflecting higher than expected repurchase operations. Other BOJ operations
1 Consequently, the SLF rate and the EFR were maintained at 2.50 2 Variance in FX operations largely reflected BFXITT market sale per cent and 6.50 per cent, respectively, during the review quarter. operations in November 2019 totalling US$90.0 million as well as weaker than expected net PSE purchases of US$24.5 million.
Bank of Jamaica 24 Quarterly Monetary Policy Report February 2020
Table 4: BOJ Liquidity Facility (J$ Billions)
Projecte Varian Actual Actual Actual BOJ Liquidity Flow d ce (J$ Billions) Sep- Dec- Dec- Jun-19 Dec-19 19 19 19
Net BOJ Operations 37.6 15.7 33.4 24.0 -9.4 (Inject/Absorb) Open Market -3.9 -10.2 7.9 10.7 2.8 Operations BOJ Repo - (incl. -2.4 0.7 -2.7 0.0 2.6 OTROs) FR CDs - (incl. -10.0 -17.1 7.8 7.7 0.0 30d cds) VR CDs 8.5 5.1 0.0 0.0 0.0 USD Indexed 0.0 1.1 2.8 3.0 0.2 Notes BOJ FX (incl. PSE) 19.5 24.3 30.5 19.3 -11.2
BOJ Other 22.0 1.6 -5.0 -6.0 -1.0 o.w. Currency -0.3 -5.0 -6.5 -6.6 -0.1 Issue o.w. Cash Reserve (Com 14.5 6.3 -1.4 -0.9 0.5 Banks) o.w. other 7.8 0.2 2.9 1.5 -1.4
GOJ Operations -37.9 -16.6 -30.6 -22.7 7.9 Current A/C (+) = Loosen; (-) = -0.3 -1.0 2.8 1.3 -1.6 Tighten Current A/C 42.6 41.6 44.4 42.9 -1.6 Balance (Stock)
Notes: (+) = Inject; (-) = Absorb Source: Bank of Jamaica
Strong foreign currency demand during the December 2019 quarter and the associated instability in market conditions necessitated BOJ’s foreign currency sales of US$140.0 million via B- FXITT flash operations. There was also a repayment of USD CDs totalling US$33.7 million. There were no new issues of USD CDs during the review period (see Table 5).
Table 4: Placements & Maturities of BOJ USD Instruments
July - September 2019 October - December 2019
Placements Maturities Average Placements Maturities Average (US$MN) (US$MN) Rate (%) (US$MN) (US$MN) Rate (%) 3-year - 34.43 - - 5.28 - 5-year - 38.41 - - 28.38 - TOTAL 0.00 72.84 - 0.00 33.66 -
Source: Bank of Jamaica
Bank of Jamaica 25 Quarterly Monetary Policy Report February 2020
7.0 Financial Markets There was a general rise in money market rates during the December 2019 quarter, which primarily reflected tightened liquidity conditions in the market in December, notwithstanding Bank of Jamaica’s unchanged monetary policy. The estimated yield curve on GOJ JMD bonds at end-December 2019 marginally shifted downwards at the longer end, relative to the yield curve at end-September 2019. Sovereign risk declined while exchange rate risk was broadly stable.
Market Interest Rates Exchange Rate Developments There was a general increase in private money The nominal exchange rate appreciated during the market rates and a decline in Treasury bill yields review quarter, relative to the previous quarter. The during the December 2019 quarter, relative to the weighted average selling rate of the Jamaica Dollar preceding quarter, in the context of an uptick in vis-á-vis the US dollar (WASR) closed the demand for liquid assets relative to supply over the December 2019 quarter at J$132.57 = US$1.00, Christmas period. When compared to the rates at reflecting appreciation of 1.92 per cent, relative to end-September 2019, overnight (O/N) private the previous quarter and depreciation of 3.80 per money market rates (PMMR), O/N interbank rates cent relative to end-December 2018.2 This outturn and 30-day PMMRs at end-December 2019 were compares to the Bank’s assumption of 0.0 per cent higher by 33 bps, 9 bps and 53 bps, respectively. (q-t-q). However, the yields on GOJ 90-day, 180-day and 270-day Treasury bills at end-December 2019 were Figure 22: Movements in WASR lower by 42 bps, 15 bps and 28 bps, respectively (see Figure 21). This decline was related to the high demand for liquid assets during the quarter, given the limited options in the market.
Figure 21: Money Market Rates (Nominal)1
There was notable pressure in the foreign exchange
BOJ BOJ BOJ O/N O/N 30-day 90- 180- 270- market during the early part of the quarter. This SLF 30-day O/N PMMR Int. PMMR day day day T- Rate CD Depo + Bank + T-Bill T-Bill Bill pressure was underpinned by increased end user sit + demand, including portfolio demand by financial Dec-18 4.75 2.33 1.75 1.97 2.24 2.43 2.05 2.07 2.06 Mar-19 4.25 2.57 1.25 1.49 1.89 2.40 2.19 2.17 2.17 institutions associated with the acquisition of real Jun-19 2.75 2.64 0.75 0.55 0.98 1.87 1.95 1.84 2.09 assets. These demand pressures were attenuated Sep-19 2.50 1.30 0.50 0.33 0.73 1.63 1.74 1.75 2.01 Dec-19 2.50 0.93 0.50 0.66 0.82 2.16 1.32 1.60 1.73 by B-FXITT sales of US$140.0 million during the
quarter, of which US$20.0 million was sold in Source: Bank of Jamaica
1 Notes: (i) PMMR is the private money market rate (ii) O/N is the 2 The WASR (avg) closed the quarter at J$137.09 = US$1.00, overnight rate in the market accessible by all financial institutions reflecting depreciation of 0.56 per cent relative to the previous while the interbank rate (I/B) is the overnight rate accessible only quarter and depreciation of 5.77 per cent relative to end- by banks. December 2018. + Reflects average rate for the month. * Rates represent month-to-date
Bank of Jamaica 26 Quarterly Monetary Policy Report February 2020
November 2019 with a directive for re-sale to non- investment options given the reduced presence of financial end-users.3 Subsequently, an appreciation the Government of Jamaica in the domestic bond cycle in December 2019 was influenced by an market.4 increase in USD supply from the earner segment of the market and a willingness of some dealers to Returns from investments in both the equity and augment US dollar liquidity. foreign currency markets were negative for the review quarter.5 More precisely, equities and foreign currency investments yielded a negative quarterly Equities Market returns of 2.0 per cent and 0.8 per cent, For the December 2019 quarter, all the major respectively. Meanwhile, the average quarterly return Jamaica Stock Exchange (JSE) indices recorded on the 30-day private money market repo was 0.44 declines, ranging from 5.2 per cent to 1.2 per cent per cent for the December 2019 quarter, which (see Figure 23). Of note, the JSE Main Index represented a slight reduction of 0.03 percentage declined by 1.2 per cent compared to growth of points relative to the September 2019 quarter (see 10.3 per cent the previous quarter. Notwithstanding, Figure 24). the quarterly decline in all the major JSE indices, as it relates to year on year performance, all five JSE Figure 24: Returns from Private Money Market, GOJ indices increased, with the JSE Main Market and Global Bonds and Capital Gains/ (Losses) from JSE Main Index Junior Market Indices recording increases of 34.3 (Per cent) per cent and 3.1 per cent, respectively.
Figure 23: Quarterly Growth of the JSE Indices (Per cent Change)
Source: Jamaica Stock Exchange and Bloomberg
The decline of the Main JSE Index for the review
quarter was also reflected in declines in market Source: Jamaica Stock Exchange activity indicators. Specifically, the value and volume of transactions decreased by 46.9 percent The negative performance of the equities market and 63.8 per cent, respectively. The number of may have been influenced by higher than expected transactions within the quarter also decreased by inflation for the review quarter even though interest 48.9 per cent relative to the previous quarter (see rates remained low. Notwithstanding , there was an Figure 25). The decrease in this measure was oversubscription of initial public offerings (IPO) primarily driven by sustained reduction in market which reflected investors’ preference for alternative activity which started in September 2019.
3 Under B-FXITT, there has typically been no restriction on 5 The return on equities is computed as the change in value of the institutions’ use of intervention funds. As a result, institutions JSE Main Index for the review quarter relative to the prior period. could build positions instead of satisfying end-user demand. The return on foreign currency investments is computed as the 4 The new listings on the JSE Main during the review period were sum of quarterly foreign currency gains (losses) and the average an IPO by Mailpac and an APO by JMMB, both of which were quarterly returns on GOJ global bonds. oversubscribed.
Bank of Jamaica 27 Quarterly Monetary Policy Report February 2020
Table 6: Stock Price Appreciation Figure 25: Quarterly Change in the Monthly Volumes, Per Advancing Values Traded & Number of Transactions (Main JSE cent Index) (Per cent) Other 15.9 Pulse Investments 52.7 Palace Amusement 38.1 MPC Caribbean Clean Energy Limited 37.2 138 Student Living Jamaica Limited 30.5 Kingston Properties Limited 18.0 Manufacturing 4.5 Kingston Wharves 16.9 Jamaica Broilers Group 14.6 Financial -0.7 Proven Investments Limited 16.2 Victoria Mutual Investment 12.0
Source: Jamaica Stock Exchange Sygnus Credit Investments Limited 8.9 Table 7: Stock Price Depreciation Per The price performance of the stocks on the JSE Declining cent Main Index, as measured by the advance to decline Financial ratio, was 22:16 for the December 2019 quarter with QWI Investment Ltd -28.1 the prices of two stocks remaining the same relative Barita Investment Ltd -16.3 to end of the previous quarter. This outturn Scotia Group Jamaica -9.8 compares to an advance to decline ratio of 25:9 for National Commercial Bank -5.8 the previous quarter. Of note, stock price Eppley Ltd -5.6 appreciation was largely concentrated among the Sagicor Select Funds Ltd -4.3 Other and Manufacturing sectors. As it relates to Tourism stock price appreciation, the Other category Ciboney Group -21.4 Other dominated the list of top ten advancing stocks, with Sagicor Select Funds Ltd -15.6 an average price appreciation of 15.9 per cent for Manufacturing the review quarter (see Tables 6 and 7). Seprod Limited -9.2 Conglomerates Pan Jamaican Investment Trust -3.0
Bank of Jamaica 28 Quarterly Monetary Policy Report February 2020
8.0 Monetary Aggregates Growth in broad money and credit to the private sector as at December 2019 were faster than previously projected, while the growth in the money base was below previous projection.
Over the ensuing eight quarters, the average annual growth in the base money is expected to decelerate relative to previous projections while broad money and private sector credit are expected to accelerate above previous projections.
Money Regarding the sources of the annual change in the The annual growth in the monetary base as at monetary base at December 2019, there was an December 2019 was 9.1 per cent, which was below increase of 5.2 per cent in Bank of Jamaica’s net previous projections. Broad money (M2J) grew by international reserves (NIR), the impact of which 17.8 per cent at December 2019, relative to was supported by an increase of 0.9 per cent in the projection of 13.2 per cent. The weaker growth in net domestic assets (NDA) (see Table 8). The the monetary base reflected stronger than expected growth in the NIR was associated with inflows from decline in bank’s current account balances as well Government of Jamaica, including public sector as lower than anticipated currency issue, the latter entities, as well as from authorized dealers and suggesting that the demand for currency may have cambios. These inflows were largely offset by GOJ been dampened by weaker than projected growth in debt and other payments, and B-FXITT sales of GDP. Growth in broad money reflected 19.2 per US$395.0 million. The cancellation of the Overnight cent growth in local currency deposits which facility in March 2019 and transfer of funds to the stemmed mainly from growth in time and demand Current Account contributed to the increase in the deposits which grew by 38.0 per cent and 16.8 per NDA. cent, respectively.
Table 8: Bank of Jamaica Operating Targets Stock (J$MN) Flow (%) Dec-18 Sep-19 Dec-19 Qtr. –o- Qtr. Y-o-Y NIR (US$MN) 3,005.41 3,098.05 3,162.54 2.1 5.2 NIR(J$MN) 383,399.68 395,218.85 403,444.99 2.1 5.2 - Assets 450,582.14 456,945.36 463,218.38 1.4 2.8 - Liabilities -67,182.46 -61,726.51 -59,773.39 -3.2 -11.0
Net Domestic Assets -180,852.61 -175,085.50 -182,491.40 4.2 0.9 - Net Claims on Public Sector 137,082.61 116,801.16 92,866.81 -20.5 -32.3 - Net Credit to Banks -63,233.15 -68,898.95 -67,433.60 -2.1 6.6 - Open Market Operations -73,962.09 -55,784.53 -45,884.53 -17.7 -38.0 - Other -180,739.97 -167,203.18 -162,040.07 -3.1 -10.3 -o/w USD FR CDs -46,239.33 -31,828.17 -27,270.38 -14.3 -41.0
Monetary Base 202,547.07 220,133.35 220,953.60 0.4 9.1 - Currency Issue 133,544.81 126,960.09 148,863.65 17.3 11.5 - Cash Reserve 67,484.21 45,140.93 45,976.05 1.9 -31.9 - Current Account 1,518.05 48,032.33 26,113.90 -45.6 1620.2
Source: Bank of Jamaica
Bank of Jamaica 29 Quarterly Monetary Policy Report February 2020
The expansion in M2J was underpinned by growth of Table 10: Select Private Sector Financing Indicators (12-month Percentage Change) 19.2 per cent in local currency deposits, an Stock Dec-18 Sep-19 Dec-19 acceleration relative to the 11.5 per cent recorded Total DTI 13.4 15.6 18.1 at end-September 2019. The growth in deposits o.w. to Businesses 15.4 16.0 20.3 was reflected in all categories of deposits, in o.w. to Consumers 12.0 15.3 16.5 particular time deposits which grew by 38.0 per cent relative to 2.0 per cent in September 2019. Stock as a % of Annual GDP Total DTI 35.0 38.1 39.5
Table 9: Components of Money Supply (M2*) o.w. to Businesses 14.5 15.8 15.7
Percentage Change (%) o.w. to Consumers 20.5 22.3 22.2
Dec-18 Sep-19 Dec-19 Total Money Supply (M2*) 13.9 8.9 15.0 Source: Bank of Jamaica
Money Supply (M2J) 14.5 11.5 17.8
Money Supply (M1J) 22.1 12.3 14.9
Currency with the Monetary Projections 13.9 11.9 12.3 public Growth in the money base over the next eight Demand 29.0 12.7 16.8 Deposits quarters is projected to be lower than previously
projected while broad money is expected to be Quasi Money 8.3 10.8 20.5 Savings Deposits 7.8 13.4 15.4 above previous projections. The monetary base is Time Deposits 10.1 2.0 38.0 expected to expand by an annual average rate of
Foreign Currency Deposits 13.0 4.5 9.9 11.8 per cent, below the previous projection of 14.5
Source: Bank of Jamaica per cent. This path reflects the impact on commercial banks’ current account of higher government balances in Bank of Jamaica than Private Sector Credit previously projected.1 M2J is projected to expand Annual growth in total private sector loans and at an average annual rate of 12.1 per cent over the advances by DTIs was 18.1 per cent at December next eight quarters, above the previous projection of 2019 relative to growth of 13.4 per cent at 11.1 per cent. This upward revision stems from a December 2018 and 15.6 per cent at September revised perspective on the demand for money 2019. The growth in overall private sector loans and emanating from slightly higher nominal GDP as well advances mainly resulted from an increase of 20.3 as trends in local currency deposits. per cent in lending to the productive sector,relative to the 16.0 per cent growth recorded at September Figure 26: Annual Growth in Base Money 2019. The growth was primarily underpinned by loans to the Transport, Construction and Professional & Other Business Services industries.
For DTIs, the ratio of financing to GDP at December 2019 was 39.5 per cent relative to 35.0 per cent at end-December 2018.
Source: Bank of Jamaica
1 The projections reflected greater than anticipated build up in influenced lower than previously forecasted current account central government balances over the forecast horizon. This balances.
Bank of Jamaica 30 Quarterly Monetary Policy Report February 2020
Figure 27: Annual Growth in M2J
Source: Bank of Jamaica
The projected growth in private sector credit over the next eight quarters is above previous projection. Private sector credit is projected to grow at an average rate of 14.2 per cent up to December 2021, compared to a previously forecasted expansion of 13.2 per cent. This revision is in keeping with the expectation of faster growth in deposits.
Figure 28: Private Sector Credit
Source: Bank of Jamaica
Bank of Jamaica 31 Quarterly Monetary Policy Report February 2020
9.0 Conclusion
There has been a slight upward adjustment to the projection of a lower debt to GDP ratio in the context baseline medium term inflation forecast. Inflation is of lower outturn for the debt of the entities and to a projected to average 4.7 per cent over the next eight lesser extent an upward revision to the projected quarters (March 2020 to December 2021), within nominal GDP. The risks to the projections for the the target range of 4.0 per cent to 6.0 per cent. This fiscal balance are assessed to be balanced. forecast track represents an acceleration relative to Jamaica’s CAD of the BOP is projected to remain the average rate of 3.8 per cent over the past eight low and sustainable over the medium term. The quarters and is marginally (0.2 pp) higher than outlook for the gross reserves has, however, previously projected. Relative to the spike in deteriorated relative to the previous projection December 2019, inflation is however expected to mainly as a consequence of the incorporation of decelerate as the impact of the agricultural price higher oil prices and the BOJ’s policy actions in the shock dissipates. Of note, this is a risk adjusted December quarter. Reserves are projected to forecast which includes an impact for drought remain below the Bank’s ARA metric over the conditions. forecast horizon. The risks to the projections for the The outlook for the US economy has improved CAD and reserves are balanced. marginally due to an easing in US-China trade tensions. While a deceleration in US GDP growth is The forecast suggests that monetary conditions will projected for the March 2020 quarter, the average remain accommodative for the March 2020 quarter growth of 1.8 per cent projected for the ensuing and beyond in the context of higher inflation eight quarters is above the previous projection of 1.7 expectations. per cent. The projection for average grains and crude oil prices over the next eight quarters has also been revised upwards, relative to the previous forecast. Oil prices are however expected to normalize by end 2020. The Bank anticipates that the US Federal Reserve (Fed) will maintain interest rates over the forecast horizon.
The Jamaican economy is projected to grow at the same pace as in previous projections. The output gap over the near term is, therefore generally in line with the last projections. The risks to the forecast for real GDP growth are assessed to be skewed to the downside.
Central government operations are projected to be, on average, slightly more restrictive over the near term compared to previous projections. Given its commitments under the Fiscal Responsibility Framework (FPP), the GOJ will no longer need to run higher primary surpluses, relative to its commitments in its fiscal policy paper, in order to meet its debt targets. This position arises from the
Bank of Jamaica 32 Additional Tables Page
1: INFLATION RATES 34 2: ALL JAMAICA INFLATION - Point-to-Point (Sept 2016) 35 3: BANK OF JAMAICA OPERATING TARGETS 36 4: MONETARY AGGREGATES 36 5: COMMERCIAL BANKS' SELECTED INTEREST RATES (%)* 37 6: GOJ TREASURY BILL YIELDS 37 7: BANK OF JAMAICA OPEN MARKET INTEREST RATES 38 8: PLACEMENTS AND MATURITIES in BOJ OMO Instruments 39 9: EXTERNAL TRADE - GOODS EXPORTS (f.o.b) 40 10: BALANCE OF PAYMENTS QUARTERLY SUMMARY 41 11: FOREIGN EXCHANGE SELLING RATES 42 12: BANK OF JAMAICA: NET INTERNATIONAL RESERVES 42 13: VALUE ADDED BY INDUSTRY AT CONSTANT (2007) PRICES (% CHANGE) 43 14: USD LONDON INTERBANK OFFER RATE–LIBOR (End- of-Period) 44 15: PRIME LENDING RATES (End-of-Period) 45 16: INTERNATIONAL EXCHANGE RATES 45 17: WORLD COMMODITY PRICES (Period Averages) 46 1: INFLATION RATES CPI (End of Point) Headline Inflation Core Inflation* Dec-07 116.82 16.82 15.62 Mar-08 122.94 19.94 17.32 FY08/09 Jun-08 130.29 23.97 20.27 Sep-08 136.45 25.30 20.99 Dec-08 136.50 16.84 16.61 Mar-09 122.94 12.43 12.98 FY09/10 Jun-09 141.95 8.95 10.29 Sep-09 146.30 7.22 9.77 Dec-09 150.44 10.21 10.28 Mar-10 156.64 13.33 11.60 FY10/11 Jun-10 160.70 13.21 10.99 Sep-10 162.77 11.26 9.40 Dec-10 168.10 11.74 8.65 Mar-11 168.92 7.84 6.57 FY11/12 Jun-11 172.28 7.20 6.67 Sep-11 175.91 8.07 6.99 Dec-11 178.21 6.01 6.86 Mar-12 168.92 7.26 6.97 FY12/13 Jun-12 183.83 6.71 6.91 Sep-12 187.61 6.65 5.59 Dec-12 192.47 8.00 5.44 Mar-13 197.72 9.13 6.30 FY13/14 Jun-13 199.93 8.76 6.26 Sep-13 207.24 10.46 6.95 Dec-13 210.70 9.47 7.38 Mar-14 214.21 8.34 6.54 FY14/15 Jun-14 215.86 7.97 6.10 Sep-14 225.86 8.99 6.72 Dec-14 224.09 6.36 5.97 Mar-15 214.21 3.96 5.51 FY15/16 Jun-15 225.30 4.37 4.81 Sep-15 229.97 1.82 4.00 Dec-15 232.30 3.66 3.51 Mar-16 229.29 2.96 3.04 FY16/17 Jun-16 230.98 2.52 2.76 Sep-16 234.23 1.86 2.49 Dec-16 236.30 1.72 2.31 Mar-17 238.66 4.09 2.27 FY17/18 Jun-17 241.22 4.43 2.43 Sep-17 244.97 4.58 2.55 Dec-17 248.67 5.24 2.65 Mar-18 248.05 3.94 2.58 FY18/19 Jun-18 248.01 2.82 2.29 Sep-18 255.58 4.33 2.44 Dec-18+ 254.74 2.44 2.36 Mar-19 256.47 3.39 2.33 FY19/20 Jun-19 258.40 4.19 2.50 Dec-18+ 254.74 2.44 2.36 Mar-19 256.47 3.39 2.33 FY19/20 Jun-19 258.40 4.19 2.50 Sep-19 264.24 3.39 2.87 Dec-19 270.58 6.22 2.95 * Core inflation is measured as headline inflation excluding agriculture and fuel related components of the CPI Basket (CPI-AF)
34 2: ALL JAMAICA INFLATION - Point-to-Point (December 2019) Weighted Divisions, Classes and Groups Weight (%) Inflation (%) Contribution Inflation
FOOD & NON-ALCOHOLIC BEVERAGES 37.46 10.73 4.02 64.61 Food 35.12 11.14 3.91 62.91 Bread and Cereals 6.10 1.83 0.11 1.79 Meat 7.66 3.15 0.24 3.88 Fish and Seafood 5.33 2.40 0.13 2.06 Milk, Cheese and Eggs 3.11 2.43 0.08 1.21 Oils and Fats 1.64 2.96 0.05 0.78 Fruit 1.14 7.11 0.08 1.30 Vegetables and Starchy Foods 6.85 32.36 2.22 35.65 Sugar, Jam, Honey, Chocolate and Confectionery 1.72 6.63 0.11 1.83 Food Products n.e.c. 1.55 4.99 0.08 1.24 Non-Alcoholic Beverages 2.35 2.87 0.07 1.08 Coffee, Tea and Cocoa 0.66 3.28 0.02 0.35 Mineral Waters, Soft Drinks, Fruit and Vegetable Juices 1.69 2.69 0.05 0.73 ALCOHOLIC BEVERAGES AND TOBACCO 1.38 2.24 0.03 0.50 CLOTHING AND FOOTWEAR 3.33 2.61 0.09 1.40 Clothing 2.12 2.41 0.05 0.82 Footwear 1.22 2.94 0.04 0.58 HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 12.76 1.51 0.19 3.09 Rentals for Housing 3.52 0.47 0.02 0.27 Maintenance and Repair of Dwelling 0.80 4.76 0.04 0.61 Water Supply and Miscellaneous Services Related to the Dwelling 1.32 1.66 0.02 0.35 Electricity, Gas and Other Fuels 7.12 1.53 0.11 1.75 FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTINE HOUSEHOLD MAINTENANCE 4.93 2.14 0.11 1.69 Furniture and Furnishings 0.69 2.36 0.02 0.26 Household Textiles 0.32 3.04 0.01 0.16 Household Appliances 0.56 3.26 0.02 0.29 Glassware, Tableware and Household Utensils 0.05 2.20 0.00 0.02 Tools and Equipment for House and Garden 0.15 1.86 0.00 0.04 Goods and Services for Routine Household Maintenance 3.16 1.82 0.06 0.93 HEALTH 3.29 2.61 0.09 1.38 Medical Products, Appliances and Equipment 1.22 2.52 0.03 0.49 Health Services 2.07 2.67 0.06 0.89 TRANSPORT 12.82 0.90 0.12 1.86 COMMUNICATION 3.99 6.99 0.28 4.49 RECREATION AND CULTURE 3.36 3.09 0.10 1.67 EDUCATION 2.14 6.25 0.13 2.15 RESTAURANTS & ACCOMMODATION SERVICES 6.19 1.62 0.10 1.61 MISCELLANEOUS GOODS AND SERVICES 8.37 3.04 0.25 4.10 ALL DIVISIONS 100.00 6.22 6.22 100.00
35
3: BANK OF JAMAICA OPERATING TARGETS Actual Actual Actual Actual Actual Actual Actual Actual Actual
Dec -17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
Net International Reserves (US$) 3,208.29 3,074.57 3,135.49 3,026.72 3,005.41 3,084.83 3,035.31 3,098.05 3,162.53 NET INT'L RESERVES (J$) 409,475.0 392,223.8 399,995.0 386,118.0 383,190.7 393,530.9 387,214.6 395,218.9 403,445.0 Assets 482,557.5 466,512.6 470,401.6 455,276.4 450,373.2 459,912.5 451,256.7 456,945.4 463,218.4 Liabilities 73,082.5 74,289.8 70,406.6 69,158.4 67,182.5 66,381.6 64,042.1 61,726.5 59,773.4
- NET DOMESTIC ASSETS -239,082.4 -224,296.9 230,166.2 -208,752.4 -180,643.6 -179,515.8 -182,895.9 -175,085.5 -182,491.4
-Net Claims on Public Sector 125,095.7 136,864.5 132,042.6 167,156.1 137,291.6 122,087.2 119,278.3 120,036.17 92,866.8 -Net Credit to Banks -63,635.0 -61,546.1 -63,547.9 -65,665.8 -63,233.2 -65,541.9 -67,623.5 -68,898.9 -67,433.6 -Open Market Operations -93,493.0 -93,283.3 -95,857.1 -117,584.7 -73,962.1 -58,532.9 -56,504.49 -56,565.5 -45,884.5 - -Other -207,050.2 -206,332.1 202,803.8 -192,657.9 -180,740.0 -177,528.3 -178,046.3 -169,657.3 -162,040.1
MONETARY BASE 170,392.6 167,925.9 169,828.8 177,365.6 202,547.1 214,015.1 204,318.6 220,133.4 220,953.6 - Currency Issue 110,920.3 104,179.7 103,673.9 108,264.9 133,544.8 116,399.2 120,388.4 127,107.1 148,989.0 - Cash Reserve 58,759.1 61,645.7 65,944.4 68,815.3 67,484.2 54,101.0 44,023.5 45,140.9 45,884.5 - Current Account 713.2 2,100.5 210.5 258.5 1,518.1 43,514.88 39,906.8 48,032.3 26,113.9
GROWTH IN MONETARY BASE [F-Y-T-D] 29.2 - 1.1 5.3 17.1 - -4.7 2.8 3.2
4: MONETARY AGGREGATES BASE M1J M1* M2J M2* M3J M3* Mar-15 101081.30 127331.43 127331.43 273286.91 444356.87 398263.53 569333.49 FY15/16 Jun-15 104475.63 142761.90 142761.90 292242.71 471576.37 422968.84 602302.50 Sep-15 107998.61 137336.80 137336.80 288215.89 475790.09 421278.58 608852.79 Dec-15 122211.75 160268.64 160268.64 317745.81 517788.53 453436.26 653478.99 Mar-16 120011.93 155348.7 180719.1 313587.6 530398.8 460873.6 677684.8 FY16/17 Jun-16 120682.00 152152.3 176967.0 315129.2 542936.3 468354.8 696162.0 Sep-16 125112.90 162012.8 183699.4 327364.0 554814.8 485596.6 713047.4 Dec-16 140698.1 184887.8 210703.5 356709.1 586686.9 514906.4 744884.2 Mar-17 139,460.80 177,728.24 205,405.77 385,130.22 636,350.53 545,141.71 796,362.01
147,019.31 176,880.50 206,834.55 390,658.46 661,159.67 555,312.55 825,813.77 FY17/18 Jun-17
Sep-17 154,764.51 183,754.61 213,187.22 425,524.34 699,679.21 601,465.45 875,620.33 Dec-17 172,290.94 205,967.44 233,487.21 457,905.02 718,529.75 633,487.37 894,112.10
Mar-18 170,142.28 220,372.56 250,633.11 479,452.65 756,399.23 657,857.33 934,803.92 FY18/19 Jun-18 169,828.80 216,289.92 251,603.73 482,485.41 770,885.09 673,782.30 962,181.99 Sep-18 177,365.64 230,629.81 266,659.06 496,418.25 804,064.91 693,490.11 1,001,136.77 Dec-18 202,547.07 251,413.40 283,542.66 524,339.37 818,748.06 731,302.94 1,025,711.62 Mar-19 214,015.10 249,673.01 285,367.63 542,149.88 844,420.19 753,609.43 1,055.879.73 204,318.65 256,383.63 294,330.41 544,085.24 858,311.49 763,563.05 1,077,789.31 FY19/20 Jun-19 Sep-19 220,133.35 258,452.00 291,166.83 553,029.15 874,593.99 784,502.64 1,106,067.49 Dec-19 220,953.60 288,765.41 324,896.57 617,627.36 941,252.00 843,835.41 1,167,460.05
36
5: COMMERCIAL BANKS' SELECTED INTEREST RATES (%) Savings Inter-bank Lending Fixed Deposits * Deposits Lending Rate Fixed Deposits Rate Loan Rate Rate 3-6 months 6-12 months (Average) (Average) (Wgt. Average) (Wgt. Average) (Average) FY12/13 Jun-12 2.00 – 5.25 2.00 – 6.00 2.10 17.46 3.59 17.36 4.95
Sep-12 2.25 – 5.25 2.00 – 6.00 2.07 17.55 3.82 17.40 6.71 Dec-12 2.25 – 6.10 2.25 – 6.40 2.07 17.23 3.92 18.44 4.02 Mar-13 0.90 – 5.00 0.90 – 5.25 1.94 17.23 3.55 17.97 4.77 FY13/14 Jun-13 0.90 – 5.30 0.90 - 6.10 1.51 16.72 3.21 17.66 3.89
Sep-13 0.90 – 5.70 0.90 – 5.90 1.62 16.47 3.88 17.45 5.23 Dec-13 1.00 – 7.10 1.25 – 7.20 1.23 14.56 4.26 17.49 7.59 Mar-14 1.00 – 7.10 1.25 – 7.20 1.40 14.74 4.50 17.57 9.42 FY14/15 Jun-14 1.00 – 7.10 1.25 – 7.20 1.40 14.76 5.03 17.50 8.08
Sep-14 1.00 – 6.88 1.25 – 7.00 1.18 14.99 4.47 16.91 4.19 Dec-14 1.00 – 6.88 1.15 – 7.00 1.44 14.99 3.98 17.18 3.90 Mar-15* 0.75 –7.00 0.95 – 7.50 0.70 18.50 3.80 17.10 3.94 FY15/16 Jun-15* 0.75 –6.75 0.95 – 7.25 0.60 18.50 4.01 17.17 .. Sept-15* 0.75 –6.70 0.95 – 7.25 0.60 18.00 3.89 17.00 .. Dec-15* 0.75 –6.70 0.95 – 7.25 0.60 18.00 3.76 16.47 .. Mar-16 0.75 –6.00 0.95 – 6.60 0.57 18.00 3.54 16.67 .. FY15/16 Jun-16 0.75 –6.00 0.95 – 6.60 0.57 18.00 3.51 16.44 ..
6: GOJ TREASURY BILL YIELDS (End of Period)
1-month 3-month 6-month 9-month 12-month
FY12/13 Sep-12 6.16 6.36 6.57 … …
Dec-12 6.31 7.67 7.18 … …
Mar-13 5.37 5.82 6.22 … …
Jun-13 6.02 6.76 7.12 … …
FY13/14 Sep-13 6.32 7.42 7.95 … …
Dec-13 6.25 7.53 8.25 … …
Mar-14 6.76 8.35 9.11 … …
Jun-14 6.80 7.66 8.37 … …
FY14/15 Sep-14 6.89 7.47 8.00 … …
Dec-14 6.38 6.96 7.14 … …
Mar-15 6.30 6.73 7.00 … …
Jun-15 6.23 6.48 6.63 … …
FY15/16 Sep-15 6.23 6.20 6.35 … …
Dec-15 5.97 5.96 6.04 … …
Mar-16 5.38 5.75 5.83 … …
Jun-16 5.47 5.86 6.01 … …
FY16/17 Sept-16 5.84 5.86 5.81 … …
37 Dec-16 5.64 5.68 6.56 … …
Mar-17 6.10 6.13 6.32 … …
Jun-17 … 5.77 6.13 … …
FY17/18 Sept-17 … 4.98 5.45 … …
Dec-17 … 4.18 4.63 … …
Mar-18 … 2.98 3.17 … …
Jun-18 … 2.54 2.66 … …
FY19/20 Sep-18 … 1.71 1.87 … …
Dec-18 … 2.05 2.07 … …
Mar-19 … 2.19 2.17 … …
Jun-19 … 1.95 1.84 … …
Sep-19 … 1.74 1.75 … …
Dec-19 … 1.32 1.60 … …
7: BANK OF JAMAICA OPEN MARKET INTEREST RATES (End of Period) 30 days 60 days 90 days 120 days 180 days 270 days 365 days
Mar-12 6.25 … … … … … … FY11/12 Jun-12 6.25 … … … … … … Sep-12 6.25 … … … … … …
Dec-12 6.25 … … … … … … Mar-13 5.75 … … … … … … FY12/13 Jun-13 5.75 … … … … … … Sep-13 5.75 … … … … … …
Dec-13 5.75 … … … … … … Mar-14 5.75 … … … … … … FY13/14 Jun-14 5.75 … … … … … … Sep-14 5.75 … … … … … …
Dec-14 5.75 … … … … … … Mar-15 5.75 … … … … … … FY14/15 Jun-15 5.50 … … … … … … Sep-15 5.25 … … … … … …
Dec-15 5.25 … … … … … … Mar-16 5.25 … … … … … … FY15/16 Jun-16 5.00 … … … … … … Sep-16 5.00 … … … … … … Dec-16 5.00 … … … … … … Mar-17 5.00 … … … … … … FY16/17 Jun-17 4.75 … … … … … … Sep-17 4.50 … … … … … … Dec-17 4.00 … … … … … … Mar-18 3.50 … … … … … … FY17/18 Jun-18 3.00 … … … … … … Sep-18 3.00 … … … … … … Dec-18 3.00 … … … … … …
38 Mar-19 3.00 … … … … … … Jun-19 1.25 … … … … … …
Sep-19 1.25 … … … … … … Dec-19 1.00 … … … … … …
8: Placements and Maturities* in BOJ OMO Instruments April – June 2019 July – September 2019 October – December 2019 Maturities Placements Average Maturities Placements Average Maturities Placements Average (J$MN) (J$MN) Yield (%) (J$MN) (J$MN) Yield (%) (J$MN) (J$MN) Yield (%) 30-day CD 119.1 134.7 2.2 166.2 159.6 2.0 137.7 144.7 1.04 272-day VR CD 13.0 0.0 0.0 0.0 0.0 0.0 365-day VR CD 0.0 0.0 0.0 0.0 0.0 0.0 548-day VR CD 0.0 0.0 0.0 0.0 0.0 0.0 729-day VR CD 0.0 0.0 0.0 0.0 0.0 0.0 272-day FR CD 0.0 7.0 2.6 0.0 0.0 0.0 0.0 365-day FR CD 0.0 0.0 0.0 0.0 0.0 0.0 272-day FR USD IB 0.0 0.0 0.0 0.0 0.0 0.0 365-day FR USD IB 0.0 0.0 0.0 0.0 0.0 0.0 Repos 51.2 60.2 46.2 46.5 79.3 84.2
Maturities Placements Average Maturities Placements Average Maturities Placements Average (US$MN) (US$MN) Yield (%) (US$MN) (US$MN) Yield (%) (US$MN) (US$MN) Yield (%) 1-year FR USD CD 0.0 0.0 0.0 0.0 0.0 0.0 2-year FR USD CD 0.0 0.0 0.0 0.0 0.0 0.0 3-year FR USD CD 2.5 0.0 34.4 0.0 5.3 0.0 4-year FR USD CD 0.0 0.0 0.0 0.0 0.0 0.0 5-year FR USD CD 0.0 0.0 38.4 0.0 28.3 0.0 7-year FR USD CD 0.0 0.0 0.0 0.0 0.0 0.0 TOTAL 2.5 0.0 72.8 0.0 33.7 0.0
39 9: EXTERNAL TRADE – GOODS EXPORTS (f.o.b) (Flows – US$MN) Other Total Bauxite Alumina Sugar Bananas Traditional Non-Traditional Other Goods Exports
FY11/12 138.3 578.8 91.5 0.1 76.5 509.3 275.3 1669.7 Jun-11 33.5 163.2 28.9 0.0 22.7 134.2 66.9 449.4 Sep-11 38.7 141.8 6.4 0.0 19.9 117.1 73.9 397.8 Dec-11 34.8 145.8 0.0 0.0 14.7 111.0 62.7 368.9 Mar-12 31.3 128.0 56.2 0.0 19.2 147.0 71.8 453.6 FY12/13 131.8 516.7 54.7 0.1 80.8 707.1 252.9 1744.1 Jun-12 31.8 132.4 37.5 0.0 22.3 126.8 66.7 417.5
Sep-12 34.7 130.7 0.5 0.0 20.4 162.3 58.6 407.1
Dec-12 32.4 117.2 0.0 0.0 19.3 223.5 57.9 450.3 Mar-13 33.0 136.4 16.8 0.0 18.8 194.5 69.7 469.2 FY13/14 125.0 526.1 53.7 0.1 70.9 455.8 260.3 1491.9 Jun-13 31.6 127.0 36.3 0.0 23.5 104.0 62.4 384.8 Sep-13 30.6 117.6 0.0 0.0 18.5 120.3 75.8 362.8 Dec-13 32.8 142.7 0.0 0.0 13.8 118.7 55.4 363.4 Mar-14 30.0 138.7 17.4 0.0 15.1 112.9 66.8 381.0 FY14/15 136.5 522.9 55.5 0.2 65.8 395.6 225.6 1402.2 Jun-14 34.4 108.6 26.5 0.0 21.0 96.1 69.2 355.9 Sep-14 33.4 151.6 11.9 0.1 16.6 99.3 62.1 375.0
Dec-14 33.4 130.4 0.0 0.1 13.6 106.8 49.2 333.5 Mar-15 35.3 132.3 17.1 0.1 14.5 93.4 45.1 337.9 FY15/16 116.4 479.8 36.9 0.3 69.9 317.8 158.3 1178.7
Jun-15 32.0 143.8 23.6 0.1 21.9 80.4 45.2 347.0
Sep-15 33.8 114.5 13.1 0.1 19.2 71.0 31.9 283.6
Dec-15 23.9 116.4 0.2 0.1 13.4 84.2 38.8 277.0
Mar-16 26.6 105.1 0.0 0.1 15.4 82.2 42.3 271.1
FY16/17 83.6 465.6 17.7 0.4 75.7 408.4 193.9 1245.2
Jun-16 26.7 126.6 9.0 0.1 26.9 90.7 55.2 335.3 Sep-16 20.6 102.7 4.8 0.1 20.6 93.0 41.0 282.7
Dec-16 17.9 109.6 0.3 0.1 13.0 108.4 49.9 299.1 Mar-17 15.3 133.4 3.6 0.1 16.5 115.2 44.9 328.9 FY17/18+ 94.5 638.2 11.3 0.6 65.9 434.4 248.6 1493.6 Jun-17 19.7 129.9 8.8 0.1 18.7 107.3 56.3 340.8 Sep-17 19.4 142.5 1.7 0.1 18.9 95.8 43.8 322.3 Dec-17 29.4 148.2 0.3 0.1 15.1 119.0 46.7 358.8 Mar-18 25.9 217.7 0.5 0.2 13.3 112.3 101.8 471.7
FY18/19+ 94.4 1097.0 14.4 0.5 68.0 431.4 247.7 1953.5
Jun-18+ 25.0 264.5 3.9 0.1 19.1 97.3 58.6 468.6 Sep-18+ 23.2 308.2 9.1 0.1 21.3 102.5 52.4 516.8 Dec-18+ 25.9 269.2 0.2 0.1 14.0 119.0 92.8 521.4 Mar-19+ 20.3 237.5 0.4 0.1 13.5 112.6 61.5 445.9 FY19/20+ 48.7 384.0 6.5 0.3 44.7 235.2 100.3 819.7 Jun-19+ 26.1 214.6 6.4 0.1 20.8 117.9 50.8 436.7 Sep-19 22.5 169.4 0.1 0.1 24.0 117.3 49.5 383.0 + Revision
40 10: BALANCE OF PAYMENTS QUARTERLY SUMMARY (US$MN)
Jun-17 Sep-17 Dec-17 Mar-18+ Jun-18+ Sep-18+ Dec-18+ Mar-19+ Jun-19 Sep-19
1. Current Account 44.0 -287.0 -171.4 -36.4 30.7 -193.8 -88.1 -98.6 -39.1 -141.8
A. Goods Balance -832.6 -967.0 -972.5 -829.0 -805.4 -919.0 -905.6 -1011.1 -1017.7 -974.9
Exports (f.o.b) 340.8 322.3 358.8 471.7 468.6 516.8 521.4 445.9 436.7 383.0
Imports (f.o.b) 1173.5 1289.3 1331.2 1300.6 1274.0 1435.8 1427.0 1457.1 1454.5 1357.9
B. Services Balance 316.8 232.1 244.3 435.4 340.9 253.8 285.3 516.1 417.2 347.1
Transportation -149.7 -158.2 -170.7 -161.7 -152.8 -183.3 -183.0 -178.4 -181.0 -171.1
Travel 622.6 577.6 636.2 794.4 666.7 642.3 709.5 921.3 793.0 746.0
Other Services -156.0 -187.2 -221.2 -197.3 -173.0 -205.2 -241.3 -226.8 -194.8 -227.8
Goods & Services Balance -515.8 -734.9 -728.2 -393.6 -464.5 -665.2 -620.4 -495.0 -600.5 -627.8
C. Income -61.4 -164.0 -37.8 -210.7 -111.7 -174.4 -99.2 -174.5 -45.0 -161.4 Compensation of employees 10.7 15.3 48.0 15.0 9.0 21.1 50.6 6.0 14.2 23.7
Investment Income -72.1 -179.3 -85.9 -225.7 -120.6 -195.5 -149.8 -180.5 -59.2 -185.1
D. Current Transfers 621.3 611.9 594.6 568.0 606.9 645.8 631.5 571.0 606.4 647.3
General Government 48.5 40.3 44.2 45.4 44.0 74.3 43.6 46.5 42.6 51.6
Other Sectors 572.8 571.6 550.5 522.6 562.9 571.5 587.9 524.5 563.8 595.8
2. Capital & Financial Account 39.3 1405.1 450.3 1720.3 67.9 569.5 836.3 -57.1 -31.8 -69.0 A. Capital Account -6.1 -9.8 -6.1 3.3 -3.7 -4.8 -6.5 -7.1 -8.5 -6.1 Capital Transfers -6.1 -9.8 -6.1 3.3 -3.7 -4.8 -6.5 -7.1 -8.5 -6.1
General Government 2.2 2.3 3.8 11.8 4.7 2.8 0.7 1.4 1.4 1.5
Other Sectors -8.3 -12.1 -9.9 -8.5 -8.5 -7.6 -7.2 -8.5 -9.8 -7.6 Acq/disp of non-produced non- fin assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
B. Financial Account 45.4 1414.9 456.4 1717.1 71.6 574.4 842.8 -50.1 -23.3 -62.9
Direct Investment 166.6 233.0 265.2 243.1 166.7 169.0 183.1 196.5 -76.7 161.0
Portfolio Investment -145.3 725.9 -14.9 1606.6 -328.7 199.6 129.8 26.7 -98.5 -311.8
Other official investment -210.9 836.7 -63.1 -4.4 -22.8 15.2 -120.4 -112.4 -156.0 -173.6
Other private Investment 82.7 139.8 340.3 -261.9 317.3 81.8 629.0 -81.5 258.3 324.3
Reserves 152.4 -520.3 -71.1 133.7 -60.9 108.8 21.3 -79.4 49.5 -62.7
Errors & Omissions -83.3 -1118.0 -278.9 -1684.0 -98.5 -375.8 -748.1 155.7 70.9 210.8
+ Revised
41 11: FOREIGN EXCHANGE SELLING RATES (J$ per unit of foreign currency – end of period) US$ Can$ GBP ₤ Dec-11 86.6000 84.2000 134.4400 Mar-12 87.3000 87.6500 139.2800 FY12/13 Jun-12 88.7000 86.7100 138.6600 Sep-12 89.9300 91.4200 145.3900 Dec-12 92.9800 93.3100 152.6400 Mar-13 98.8900 97.9900 151.9000 FY13/14 Jun-13 101.3800 96.7000 154.4800 Sep-13 103.6000 100.7100 167.1600 Dec-13 106.3800 99.7200 175.8400 Mar-14 109.5700 98.9300 181.7700 FY14/15 Jun-14 112.2022 103.1802 191.8988 Sep-14 112.6662 101.0142 180.2393 Dec-14 114.6607 97.6896 177.6759 Mar-15 115.0435 90.6202 169.9738 FY15/16 Jun-15 116.9832 93.8399 183.7774 Sep-15 119.0553 88.6177 180.1478 Dec-15 120.4150 84.9062 177.1179 Mar-16 122.0421 92.5223 173.4625 FY16/17 Jun-16 126.3835 97.8795 169.8517 Sept-16 128.2704 97.3084 166.7776 Dec-16 128.4404 95.8778 157.4208 Mar-17 128.6672 97.1686 159.5670 FY17/18 Jun-17 128.6228 99.3865 166.5811 Sep-17 129.9127 105.0988 173.8791 Dec-17 125.0004 97.3947 167.0275 Mar-18 125.9850 97.1994 178.1109 FY18/19 Jun-18 130.3918 100.0079 172.9757 Sep-18 134.6486 103.7023 178.1844 Dec-18 127.7162 91.5382 159.0355 Mar-19 126.4666 95.8862 165.5342 FY19/20 Jun-19 131.0682 101.8648 168.0812 Sep-19 135.1591 102.3052 166.1363 Dec-19 132.5690 100.1539 171.6232
12: BANK OF JAMAICA: NET INTERNATIONAL RESERVES (End-of-Point) (US$MN) (US$MN) (US$MN) Weeks of Imports Gross Foreign Gross Foreign Liabilities International Reserves (Net) Goods Goods & Services Assets FY12/13 Jun-12 2,385.10 844.70 1,540.40 21.10 15.90
Sep-12 2,115.90 858.10 1,257.80 18.90 14.10
Dec-12 1,980.80 855.20 1,125.60 17.70 13.20
Mar-13 1,718.40 834.10 884.30 15.40 11.50 FY13/14 Jun-13 1,881.10 877.90 1,003.20 16.70 12.60
Sep-13 1,713.50 803.40 910.10 15.80 11.90 Dec-13 1,817.60 769.70 1,047.90 17.30 12.80
Mar-14 2,048.60 745.00 1,303.60 19.10 14.40 FY14/15 Jun-14 2,016.53 640.40 1,376.13 20.19 14.57
Sep-14 2,715.25 514.68 2,200.57 27.79 19.66 Dec-14 2,473.01 471.92 2,001.09 26.31 18.41
42 Mar-15 2,689.74 396.06 2,293.68 28.61 20.02
FY15/16 Jun-15 2,537.27 420.76 2,116.51 29.00 19.83
Sep-15 2,890.45 448.57 2,441.88 32.34 22.39
Dec-15 2,890.45 479.82 2,437.01 34.61 23.45
Mar-16 2,894.31 478.77 2,415.53 34.38 23.30
FY16/17 Jun-16 2,819.90 554.77 2,265.13 32.66 19.36
Sep-16 3,056.16 593.15 2,463.01 36.30 24.60
Dec-16 3,291.47 -572.10 2,719.37 38.40 22.27
Mar-17 3,323.89 -554.72 2,769.17 38.78 22.49
FY17/18 Jun-17 3,185.65 -568.84 2,616.81 35.44 20.54
Sep-17 3,714.94 -577.80 3,137.14 40.87 23.70
Dec-17 3,781.17 -572.88 3,208.29 38.83 22.78
Mar-18 3,656.91 -582.35 3,074.57 35.83 21.29
FY18/19 Jun-18 3,687.40 -551.91 3,135.49 32.49 19.80
Sep-18 3,568.84 -542.12 3,026.72 33.14 19.67
Dec-18 3,532.04 -526.63 3005.41 32.80 19.47
Mar-19 3,605.18 -520.35 3,084.83 35.54 20.50
FY18/19 Jun-19 3,537.33 -502.02 3,035.31 32.88 22.62
Sep-19 3,581.92 -483.86 3,098.05 33.45 22.82
Dec-19 3,631.09 -468.55 3,152.53 33.80 22.94
13: VALUE ADDED BY INDUSTRY AT CONSTANT (2007) PRICES (% CHANGE) Sep 2016 – Jun 2018 + (Seasonally Unadjusted) (Percentage Change (%) Over the Corresponding Quarter of Previous Year)
Dec-17 Mar-18 Jun-18 Sep-18+ Dec-18 Mar-19 Jun-19 Sep-19
Total Value Added at Basic Prices 1.2 1.4 2.2 1.8 1.9 1.7 1.3 0.6 Agriculture, Forestry & Fishing -0.5 0.6 12.5 -0.0 3.1 0.3 -1.7 -0.7 Mining & Quarrying 14.6 25.9 31.6 52.9 25.0 11.1 4.6 -17.6 Manufacturing 0.4 0.8 0.2 -0.3 2.0 -1.4 3.3 4.9 Food, Beverages & Tobacco 0.4 -1.3 2.5 0.1 2.0 0.1 0.1 2.4 Other Manufacturing 0.5 4.0 -3.2 -0.8 2.0 -3.4 8.3 8.8 Construction 0.7 1.1 2.9 3.8 3.7 3.3 -1.4 -2.1 Electricity & Water 0.5 1.0 1.0 -0.1 -0.3 1.9 -0.1 0.8 Wholesale & Retail Trade; Repairs; Installation Of Machinery 0.7 0.5 0.6 0.8 1.6 1.2 1.0 0.6 Hotels and Restaurants 5.9 1.9 0.4 2.1 2.8 7.3 5.8 2.5 Transport, Storage & Communication 0.8 1.4 1.6 1.4 1.9 1.1 0.8 1.2 Finance & Insurance Services 0.8 1.2 1.1 0.7 0.8 2.5 4.4 3.3 Real Estate & Business Services 0.8 0.8 0.6 0.5 0.7 1.0 0.8 0.9 Government Services 0.3 0.1 0.0 -0.0 0.1 0.2 0.3 0.4 Other Services 1.1 1.7 1.3 0.3 1.2 0.8 1.8 1.9 Less Financial Intermediation Services Indirectly Measured (FISIM) 0.8 0.8 1.1 2.1 2.1 4.0 2.6 3.7
43 14: USD LONDON INTERBANK OFFER RATE–LIBOR (End- of-Period)
1-month 3-month 6-month 12-month
FY11/12 Sep-11 0.2394 0.3743 0.5578 0.8649
Dec-11 0.2953 4.9075 0.8085 1.1281 Mar-12 0.2413 0.4682 0.7334 1.0485 FY12/13 Jun-12 0.2458 0.4606 0.7344 1.0680 Sep-12 0.2143 0.3585 0.6359 0.9730
Dec-12 0.2087 0.3060 0.5083 0.8435 Mar-13 0.2037 0.2826 0.4449 0.7315 FY13/14 Jun-13 0.1958 0.2731 0.4144 0.6902 Sep-13 0.1789 0.2489 0.3685 0.6294
Dec-13 0.1677 0.2461 0.3480 0.5831 Mar-14 0.1520 0.2306 0.3289 0.5581 FY14/15 Jun-14 0.1552 0.2307 0.3268 0.5451 Sep-14 0.1565 0.2351 0.3304 0.5786 Dec-14 0.1713 0.2556 0.3628 0.6288 Mar-15 0.1763 0.2708 0.4007 0.6942 FY15/16 Jun-15 0.1865 0.2832 0.4449 0.7715 Sep-15 0.1930 0.325 0.534 0.8511 Dec-15 0.4300 0.613 0.846 1.1780 Mar-16 0.4370 0.6290 0.900 1.2100 FY16/17 Jun-16 0.4650 0.6540 0.9240 1.2300 Sept-16 0.5311 0.8537 1.2397 1.5518 Dec-16 0.7717 0.9979 1.3177 1.6857 Mar-17 0.9828 1.1496 1.4232 1.8018 FY17/18 Jun-17 1.2239 1.2992 1.4477 1.7384 Sep-17 1.2322 1.3339 1.5060 1.7823 Dec-17 1.5640 1.6940 1.8370 2.1070 Mar-18 1.8831 2.3118 2.4524 2.6626 FY18/19 Jun-18 2.0903 2.3358 2.5013 2.7641 Sep-18 2.2606 2.3984 2.6039 2.9186 Dec-18+ 2.5027 2.8076 2.8756 3.0054 Mar-19 2.4945 2.5998 2.6595 2.7106 FY19/20 Jun-19 2.3980 2.3199 2.2005 2.1781 Sep-19 2.0156 2.0851 2.0556 2.0321 Dec-19 1.7625 1.9083 1.9121 1.9962
44
15: PRIME LENDING RATES (End-of-Period)
EURO-ZONE UNITED STATES UNITED KINGDOM Repo rate Fed Funds Rate Discount Rate Prime Rate Repo rate Sep-11 1.50 0 – 0.25 0.75 3.25 0.50 Dec-11 1.00 0 – 0.25 0.75 3.25 0.50 Mar-12 1.00 0 - 0.25 0.75 3.25 0.50 FY12/13 Jun-12 1.00 0 - 0.25 0.75 3.25 0.50 Sep-12 0.75 0 - 0.25 0.75 3.25 0.50 Dec-12 0.75 0 - 0.25 0.75 3.25 0.50 Mar-13 0.75 0 - 0.25 0.75 3.25 0.50 FY13/14 Jun-13 0.50 0 - 0.25 0.75 3.25 0.50 Sep-13 0.50 0 - 0.25 0.75 3.25 0.50 Dec-13 0.25 0 - 0.25 0.75 3.25 0.50 Mar-14 0.25 0 - 0.25 0.75 3.25 0.50 FY14/15 Jun-14 0.15 0 - 0.25 0.75 3.25 0.50 Sep-14 0.05 0 - 0.25 0.75 3.25 0.50 Dec-14 0.05 0 - 0.25 0.75 3.25 0.50 Mar-15 0.05 0 - 0.25 0.75 3.25 0.50 FY15/16 Jun-15 0.05 0 - 0.25 0.75 3.25 0.50 Sep-15 0.05 0 - 0.25 0.75 3.25 0.50 Dec-15 0.05 0 - 0.50 1.00 3.50 0.50 Mar-16 0.00 0 - 0.50 1.00 3.50 0.50 FY16/17 Jun-16 0.00 0 - 0.50 1.00 3.50 0.50 Sept-16 0.00 0 – 0.50 1.00 3.50 0.25 Dec-16 0.00 0 .50– 0.75 1.25 3.75 0.25 Mar-17 0.00 0.75–1.00 1.50 4.00 0.25 FY17/18 Jun-17 0.00 1.00–1.25 1.75 4.25 0.25 Sep-17 0.00 1.00–1.25 1.75 4.25 0.25 Dec-17 0.00 1.25-1.50 2.00 4.50 0.50 Mar-18 0.00 1.50-1.75 2.25 4.75 0.50 FY18/19 Jun-18 0.00 1.75-2.00 2.50 5.00 0.50 Sep-18 0.00 2.00-2.25 2.75 5.25 0.75 Dec-18 0.00 2.25–2.50 3.00 5.50 0.75 Mar-19 0.00 2.25–2.50 3.00 5.50 0.75 FY19/20 Jun-19 0.00 2.25-2.50 3.00 5.50 0.75 Sep-19 0.00 1.75-2.00 2.50 5.00 0.75 Dec-19 0.00 1.50-1.75 2.25 4.75 0.75
16: INTERNATIONAL EXCHANGE RATES
Sterling vs. US$ Canadian $ vs. US$ Yen vs. US$ Euro vs. US$ Mar-12 0.6256 0.9991 82.4340 0.7500 FY12/13 Jun-12 0.6376 1.0191 79.8040 0.7894 Sep-12 0.6199 0.9837 77.9480 0.7779 Dec-12 0.6150 0.9949 86.6630 0.7584 Mar-13 0.6588 1.0156 94.0370 0.7787 FY13/14 Jun-13 0.6575 1.0512 99.1700 0.7687 Sep-13 0.6181 1.0285 98.3270 0.7389 Dec-13 0.6034 1.0636 105.2030 0.7258 Mar-14 0.6012 1.1053 103.0100 0.7259 FY14/15 Jun-14 0.5846 1.0676 101.2900 0.7305 Sep-14 0.6168 1.1196 109.6491 0.7917 Dec-14 0.6418 1.1614 119.8035 0.8264 Mar-15 0.6737 1.2679 119.9472 0.9321
45 FY15/16 Jun-15 0.6737 1.2483 122.1001 0.8966 Sep-15 0.6609 1.3394 119.6745 0.8943 Dec-15 0.6786 1.3837 120.2501 0.9206 Mar-16 0.6964 1.3004 112.5746 0.8787 FY16/17 Jun-16 0.7513 1.2925 103.1779 0.9004 Sept-16 0.7709 1.3127 101.3377 0.8901 Dec-16 0.8104 1.3439 117.0001 0.9508 Mar-17 0.7968 1.3317 111.3958 0.9388 FY17/18 Jun-17 0.7677 1.2963 112.3469 0.8752 Sep-17 0.7464 1.2470 112.5239 0.8465 Dec-17 0.7400 1.2571 112.6888 0.8330 Mar-18 0.7135 1.2895 106.2812 0.8114
FY18/19 Jun-18+ 0.7572 1.3134 110.6929 0.8559 Sep-18 0.7601 1.3043 111.8443 0.8559 Dec-18 0.7841 1.3639 109.6131 0.8721 Mar-19 0.7672 1.3349 110.8525 0.8914
FY19/20 Jun-19 0.7876 1.3094 107.8865 0.8793 Sep-19 0.8161 1.3224 106.3943 0.9062 Dec-19 0.7543 1.2990 108.6366 0.8918
17: WORLD COMMODITY PRICES (Period Averages)
CRUDE OIL PRICES FOOD North Sea Brent West Texas Intermediate Wheat Coffee
(US$/barrel – f.o.b.) (US$/barrel – f.o.b.) (US$/mt, Average Winter) (USc/kg, Arabica brand) FY14/15 Jun-14 109.78 102.98 292.86 467.06 Sep-14 102.08 97.07 238.17 455.92 Dec-14 76.01 73.16 248.61 464.59 Mar-15 53.93 48.63 231.09 389.21 FY15/16 Jun-15 62.10 57.97 210.64 354.39 Sep-15 50.03 51.52 189.86 336.22 Dec-15 43.41 42.18 190.10 327.74 Mar-16 34.36 33.45 190.23 330.86 FY16/17 Jun-16 45.95 45.50 183.79 346.71 Sept-16 45.80 44.94 156.02 378.80 Dec-16 50.08 49.29 156.18 385.71 Mar-17 54.12 51.91 165.66 364.09 FY17/18 Jun-17 50.25 48.28 177.79 329.68 Sep-17 51.74 48.20 183.94 327.83 Dec-17 61.47 55.40 177.43 307.79 Mar-18 66.95 62.87 190.71 301.42 FY18/19 Jun-18 74.49 67.88 210.30 296.87 Sept-18 75.48 69.50 215.61 277.04
Dec-18 67.37 58.81 211.01 295.09 Mar-19 63.27 54.90 212.06 279.84 FY19/20 Jun-19 68.34 59.81 204.21 272.94 Sep-19 61.86 56.45 195.06 287.03 Dec-19 62.65 56.96 214.61 311.92
*based on Bloomberg’s indicative daily prices.
46 Quarterly Monetary Policy Report Glossary
Glossary
Amortization: The repayment of a loan in installments over an agreed period of time.
Base Money: The sum of notes and coins held by the public and the cash reserves of commercial banks (including both their holding of cash and their deposits at the central bank). The monetary base is the operating target used in the BOJ monetary policy framework and can be controlled through open market operations. Changes in the monetary base emanate from sources within the net domestic assets (NDA) as well as the net international reserves (NIR).
Basis Point (bp): This is a unit of percentage measure which is equal to one hundredth of one percent ( 0.01% = 1bp). Basis points is commonly used when discussing interest rates and fixed income securities.
Bond Market: The domestic bond market primarily captures debt instruments offered by the Central Government to fund its budgetary needs.
Brexit: Brexit has become the abbreviated way of refering to the United Kingdon (UK) leaving the European Union (EU) it combines the words British and exit. The referndum where citizens of the UK voted to exit the EU took place on the June 23, 2016.
Cash Reserve Requirement: The requirement by law that a percentage of deposit liabilities of deposit-taking institutions must be held as interest free deposits at the Central Bank.
Core Inflation: Also called Underlying Inflation. It is that part of overall inflation that can be attributed to changes in base money. Central Banks typically try to control core inflation because there are some parts of inflation that are outside of their control. One example of this is the effect of changes in oil prices.
Credit: Loans extended by banks, building societies and other financial institutions.
Currency Issue: refers to Jamaican notes and coins in the hands of the public (currency in circulation) in addition to notes and coins held by financial institutions in their vaults (vault cash). Bank of Jamaica redeems (buys) or issues (sells) notes and coins to financial institutions when institutions have a demand for cash. The difference between currency issued and that which is redeemed during a period of time is referred to as net currency issue.
Exchange rate (nominal): The number of units of one currency offered in exchange for another. For example a Jamaica dollar/ United States dollar exchange rate of ‘forty two dollars to one’ indicates that forty-two Jamaican dollars are needed to obtain one United States dollar.
Exchange rate pass-through: The effect of exchange rate changes on one or more of the following: import and export prices, consumer prices, investments and trade volumes.
Export Price Index: The export price index (EPI) is a weighted index of the prices of goods and services sold by residents of a country to foreign buyers.
Foreign exchange cash demand/supply: The amount of foreign exchange purchased by market participants from the authorized dealers and cambios, while cash supply/inflows is the amount sold to the Bank of Jamaica, authorized dealers and cambios by market participants, private institutions and multilateral agencies.
Financial Programme: An integrated system of macroeconomic accounts and behavioural relationships defining the set of monetary, fiscal and exchange rate policy measures designed to achieve specified macroeconomic targets.
47 Quarterly Monetary Policy Report Glossary
Financial Asset: An instrument issued by an institution (e.g. BOJ) that provides economic benefits, by (1) generating interest income or net profits and (2) acting as a store of value. These benefits are created through a formal/informal borrowing/lending relationship. Most common types of financial assets are money and credit.
Fiscal deficit: The excess of the Government’s expenditure over its revenue for a given period of time.
Fiscal Year: The twelve months beginning in April. Thus fiscal year 2000/2001 refers to the period April 2000 to March 2001.
Government Securities: Debt instruments issued by the Ministry of Finance either to bridge timing gaps between revenue and expenditure or to cover any excess of expenditure over revenue. These securities include short-term instruments such as Treasury Bills and more long-term ones like Local Registered Stock, or Debentures.
Gross Domestic Product (GDP): This is the total value of all goods and services produced within an economy over a particular time period –either a year or three months.
Import Price Index: The import price index (IPI) is a weighted index of the prices of goods and services purchased by residents of a country from foreign sellers.
Inflation: refers to the change in the general price level. In Jamaica, this is defined as the change in the Consumer Price Index (CPI) calculated and published by the Statistical Institute of Jamaica.
Intermediate Target: An intermediate target of policy. e.g. the money supply or the exchange rate, has three main characteristics. It is not directly determined by the Central Bank, it responds, however, to a stimulus that the Central Bank can vary, and its behaviour should be closely related to the ultimate target-inflation.
Jamaica Central Securities Depository (JCSD): The Principal function of the JCSD is to provide for relatively risk-free settlement of share transactions. It accomplishes this by employing an electronic, book-entry system for registering changes of ownership of securities which eliminates the need for physical certificates. The JCSD also provides vaulting facilities for the safekeeping of certificates.
JSE Indices: The JSE Index comprises all Ordinary Companies on the Main Market. The JSE Combined Index comprises all Ordinary Companies on the Main Market and Junior Market. The JSE All Jamaican Composite Index comprises of only Jamaican Companies on the Main Market. The JSE Select Index comprises the JSE’s 15 most liquid Securities on the Main Market. The JSE Cross Listed Index is comprised of only foreign companies on the Main Market. The Junior Index comprises all Ordinary Companies on the Junior Stock Market.
Liquid Asset: An asset is considered liquid if it can be easily and with little or no loss converted to cash. The liquid assets of commercial banks in Jamaica include notes and coins, short-term deposits at the Bank of Jamaica, GOJ Treasury Bills, Local Registered Stock maturing within 270 days and any GOJ security designated by the Ministry of Finance.
Money: Anything that is generally accepted in exchange for goods and services and for the payment of debt. (e.g. example, notes and coins.). Hence money is said to be a medium of exchange. Money also serves as a means of storing wealth as well as a standard of and unit of accounting for financial values and flows.
Money Multiplier: This defines the relationship between the monetary base (M0) and the money supply and is usually calculated as the ratio of M3 to M0. It measures the maximum amount of money that can be created by the banking system given the provision of an additional dollar to the system by the central bank. The money multiplier implies that when the central bank conducts monetary policy in such a way as to increase the monetary base, the overall expansion in the money supply is a multiple of this initial increase. This is also true if the central bank reduces the monetary base.
48 Quarterly Monetary Policy Report Glossary
Money Supply: This is the stock of instruments or assets formally designated as money in a particular economy. There are alternative measures of money supply both within and between countries. In Jamaica, the measurements of money that are calculated and published are: M1: Notes and coins in circulation + Demand Deposits M2: M1+ Time and savings deposits M3: M2 + Other Deposits. A ‘J’ indicates that the components are Jamaican dollar liabilities only and an ‘*’ indicates that the components also include foreign currency liabilities of the banking system.
Monetary Base: See Base Money
Monetary policy framework: This defines the transmission process through which policy actions taken by the Central Bank make an impact on the final target - inflation. The components of a monetary policy framework are policy instruments, operating targets, intermediate targets, and the ultimate goal/objective.
Monetary Policy Instruments: These are instruments used by the Central Bank to influence the money supply and credit. They include open market operations and the reserve requirement ratio.
Net Domestic Assets: The difference between the monetary base and the NIR. It is comprised of the Bank’s net claims on the public sector, mainly Central Government, open market operations liabilities and net claims on commercial banks and other financial institutions.
Open Market Operations (OMO): Money market trading between the Bank of Jamaica and authorized dealers with the intention of influencing money and credit in the financial system. OMO involves outright sale or purchase of GOJ securities from the stock of securities held by BOJ, and/or repurchase and reverse repurchase transactions.
Operating Rate: The percentage of total production capacity of some entity, such as a country or a company that is being utilized at a given time.
Operating Target: An operating target of policy e.g. the monetary base and interest rates, is influenced directly by the Central Bank and is adjusted by the Bank in order to bring about the desired impact on its policy target.
Primary Dealer (PD): The set of intermediaries through which BOJ conducts open market operations. In developed country markets, PD’s underwrite government issues as well as participate in block transactions with the central bank.
Public Sector Entities (PSE) Foreign Exchange Facility: A foreign exchange surrender facility for public sector entities which seeks to centralize foreign currency demand. Under this facility Commercial Banks, Authorized Dealers and Cambios agreed to surrender amounts in addition to the pre-existing requirements.
Quasi-Fiscal Costs: The cost to the central bank of sterilizing the liquidity effects of capital inflows.
Quasi-money: Savings Deposits plus Time Deposit.
Real Appreciation: An increase in the volume of foreign goods that can be bought with a unit of domestic currency; alternatively it is a decrease in the volume of domestic goods that can be purchased with a unit of foreign currency. Thus, a real appreciation makes exports less attractive and imports relatively cheaper. This may ensue from a nominal appreciation, which is the rise in the unit price of the currency, or a greater increase in domestic prices relative to foreign prices, or both.
49 Quarterly Monetary Policy Report Glossary
Real Exchange Rate: The price of one country’s currency in terms of another, adjusted for the inflation differential between the countries.
Real interest rate: This represents the rate of return on assets after accounting for the effects of inflation on the purchasing power of the return. It is calculated by adjusting the nominal interest rate by the inflation rate.
Repurchase Agreement (repo): The purchase of a security from a primary dealer who agrees to repurchase the same at a specified rate and an agreed future date.
Reserve Requirement: refers to the portion of deposit liabilities that financial institutions may not lend and have to retain either as liquid assets or on deposit at the Bank of Jamaica.
Reverse Repurchase Agreements: An agreement whereby the Central Bank sells a security that it owns and agrees to buy back same at a specified rate at an agreed future date.
Securities: Legal documents giving entitlement to property ownership, or claim on income e.g. bonds and stocks.
Signal Rate: Effective 1 July 2017, the Bank of Jamaica policy rate is the interest rate paid on overnight deposits held by deposit-taking iinstitutions ("DTIs") at Bank of Jamaica.
Special Drawing Right: The SDR is an interest-bearing international reserve asset created by the IMF to supplement the official reserves of member countries.
Statutory Cash Reserves: That portion of deposit liabilities of deposit-taking institution, which by a statutorily based stipulation, must be held as interest-free deposits at the Central Bank.
Sterilization: The use of open market operations to prevent intervention in the foreign exchange market from changing the monetary base. With sterilization, any purchase of foreign exchange is accompanied by an equal-value sale of domestic bonds and vice versa.
Time deposit: A bank account based on a contractual arrangement between the deposit taking institution and the depositor where both parties agree to a pre-determined interest rate and maturity date, on which deposits earn interest and premature withdrawals from which require advance notice.
Terms of Trade: An index of the ratio of export prices to the index of import prices. An improvement in the terms of trade follows if export prices rise more quickly than import prices.
Tourism Implicit Price Index: a measure of prices in the tourism industry as reflected by average daily expenditure per tourist.
50 List of Boxes
QMPR ISSUE LIST OF BOXES
Oct – Dec 2000 1 Sovereign Credit Ratings & Outlook 2 E-Gate & The Foreign Exchange Market 3 The International Oil Market: Recent Developments and Outlook 4 Jamaica’s IMF Staff Monitored Programme (SMP) Jan – Mar 2001 5 Core Inflation in Jamaica – Concept & Measurement 6 Highlights of the IMF 2001 Article IV Consultation Apr – Jun 2001 7 Jamaica’s Banking Sector Recovery – An Overview 8 Jamaica’s Sovereign Credit Ratings – An Update 9 Highlights of the IMF’s May 2001 Article IV Consultation Jul – Sep 2001 10 Innovations in Jamaica’s Payment System 11 Expanding the Role of Equity Finance in Jamaica: Some Perspectives 12 The US Economy: Recent Trends and Prospects Oct – Dec 2001 13 The Performance of Remittances in the Jamaican Economy: 1997 - 2001 14 Tourism and the Jamaican Economy: Pre & Post 11 September 2001 15 World Trade Organization (WTO): Outcome of the Fourth Ministerial Conference in Doha. Qatar and the Possible Implications for Jamaica Jan – Mar 2002 16 Commercial Bank Probability: January to December 2001 17 Regional Disparities in Jamaica’s Inflation – 1997/98 to 2001/02 18 The Argentina Debt Crisis & Implications for Jamaica 19 General Data Dissemination Standards Apr – Jun 2002 20 The Automated Clearing House: Implications for the Payment System 21 Macroeconomic Implications of Cross Border Capital Flows: Some Scenarios 22 Performance of Remittances in the Latin American and Caribbean Region – 1997 to 2001 Jul – Sep 2002 23 Building Societies’ New Mortgage Loans: July 2001 – June 2002 24 An Overview of the CARICOM Single Market and Economy (CSME) Oct – Dec 2002 25 The Profitability of the Banking System: 1991 - 2002 26 Interest Rates Spreads in Jamaica: 1995 - 2002 27 Implications of the International Accounting Standards (IAS) for Financial Systems and Financial Stability Jan – Mar 2003 28 Opportunities for Savings and Investments in Jamaica: Financial Intermediaries and Financial Instruments 29 The CPI and the GDP Deflator: Concepts and Applications Apr – Jun 2003 30 The Concept and Measurement of External Competitiveness 31 Exchange Rate Pass-Through in the Jamaican Economy Jul – Sep 2003 32 The International Investment Position 33 The Fifth WTO Ministerial Conference: Implications for Future Trading Negotiations Oct – Dec 2003 34 The Monetary Policy Committees: International Precedents and Macroeconomic Context 35 Macroeconomic Determinants of Nominal Interest Rate Jan – Mar 2004 36 Recent Trends and Prospects in the Balance of Payments 37 The Exchange Rate Regime and Monetary Policy Apr – Jun 2004 38 Preserving Financial Stability 39 Financial Sector Assessment Programme 40 Jamaica’s Current Relationship with the IMF Jul – Sep 2004 41 Recent Developments in Crude Oil Prices 42 Implications of Higher Crude Oil Prices for the Balance of Payments and Inflation Oct – Dec 2004 43 Recent Trends in Foreign Direct Investment
51 44 Exploring the Jamaican Foreign Exchange Market Dynamics: 2001 – 2004 (Special Feature) Jan – Mar 2005 45 The BOJ Macroeconomic Stress Testing Programme and Financial Stability 46 Issues of Foreign Reserve Adequacy Apr – Jun 2005 47 Credit Bureaux and Financial Market Efficiency 48 Trends in Labour Productivity Jul – Sep 2005 49 Inflation in Selected Caribbean Countries 50 International Developments (Special Feature) Oct – Dec 2005 51 Payment Systems Reform Jan – Mar 2006 52 The IMF’s Code of Good Practices on Transparency on Monetary policy: A Summary of the IMF’s Assessment Report on Jamaica Apr – Jun 2006 53 Trends in Private Sector Credit: FY2001/02 to FY2005/06 54 Exploring the Interest Rate Differential between Jamaica Dollar and US Dollar Denominated Assets: Jan 2001 – June 2006 55 Jamaica Labour Market: Trends and Key Indicators – 1996 to 2005 Jul – Sep 2006 56 Labour Market Update – June 2006 57 The Special (Upper Income) Consumer Price Index 58 Jamaica Interim Staff Report Under Intensified Surveillance: Executive Summary Oct – Dec 2006 59 Factors Influencing the Demand for Currency Issued by the BOJ & the Impact of Currency Demand on the Balance Sheet of Financial Institutions Jan – Mar 2007 60 Jamaica’s Financial Programme 61 Inflation Expectation Survey 62 The Producer’s Price Index Apr – Jun 2007 63 Measuring Core Inflation: Emerging Issues Jul – Sep 2007 64 The Turbulence in the US Subprime Mortgage Market 65 The Revised Consumer Price Index Oct – Dec 2007 66 Trends in Jamaica’s Fuel Demand 67 Trends in Inflation 68 The EU-CARIFORUM Economic Partnership Agreement Jan – Mar 2008 69 Impact of a Potential US Recession on the Jamaican Economy 70 Recent Trends in International Commodity Prices Apr – Jun 2008 71 Global Monetary Policy Response to Spiralling Commodity Prices Jan – Mar 2009 72 BOJ’s Monetary Policy Response to the Global Financial Crisis 73 The Transmission of Monetary Policy in Jamaica 74 Monetary Policy, Economic Growth and Inflation Apr – Jun 2009 75 The International Monetary Fund (IMF) and Jamaica’s Experience with the IMF Jul – Sep 2009 76 Fiscal Responsibility Frameworks/Fiscal Rules Oct – Dec 2009 77 Bank of Jamaica Liquidity Support to the Government: November 2009 – January 2010 78 The Dynamics of Jamaica’s Interest Rate 79 Jamaica’s Medium-Term Economic & Financial Programme: FY2009/10 – FY2013/14 Jan – Mar 2010 80 Jamaica’s Inflation: How Much is Enough? 81 The Jamaica Debt Exchange Apr – Jun 2010 82 Exchange Rates and External Price Competitiveness 83 Adequacy of the BOJ’s Gross International Reserves Jul – Sep 2010 84 Preserving Financial Stability (revisited) 85 Credit Bureaux and the Efficiency of Credit Markets (updated) Oct – Dec 2010 86 An Inflation Targeting Framework for Jamaica Jan – Mar 2011 87 The Middle East and North Africa (MENA) Crisis and its Implication for the Jamaican Economy Apr – Jun 2011 88 Evolution of the European Debt Crisis & its Impact on Jamaica Jul – Sep 2011 89 Electronic Small-Value Retail Payments: Recent Trends and the Relationship with Economic Growth Oct – Dec 2011 90 Productivity and Growth Jan – Mar 2012 91 External Competitiveness in Jamaica Apr – Jun 2012 92 The Importance of Managing Inflation Expectations
52 Jul – Sep 2012 93 A Preliminary Assessment of the Impact of Hurricane Sandy on Prices – Results from a Field Survey Oct – Dec 2012 94 Fiscal Expenditure Multipliers and Economic Growth Jan – Mar 2013 95 Jamaica’s Medium-Term Economic & Financial Programme: FY2013/14 – FY2017/18 Apr – Jun 2013 96 The Evolution of the Jamaica Dollar Liquidity and its Impact on Money Market Rates: January to June 2013 97 Recent Trends and Developments in Remittances Jan – Mar 2014 98 The Bank of Jamaica’s Quarterly Credit Conditions Survey (recurrent) Apr – Jun 2014 99 Jamaica’s Macroeconomic Programme under the EFF (recurrent) 100 Monetary Policy Transmission Mechanism (recurrent) Jul – Sept 2014 101 Changes to the Liquidity Management Framework for Deposit-taking Institutions Oct – Dec 2014 102 Recent Developments in Crude Oil Prices Jan – Mar 2014 103 An Examination of Current Account Financing from the BPM6 Perspective Jul – Sept 2015 104 Inflation Differential 105 Trends in selected measures of Labour Productivity Oct – Dec 2015 106 Impact of Increases in the Federal Funds Rate on the Jamaican Economy 107 A technical examination of the recent stock market appreciation Jan – Mar 2016 108 Macroeconomic Model (MonMod) Component Contribution to Inflation (recurrent) 109 Businesses’ Inflation Expectations Survey (recurrent) Apr – Jun 2016 110 Implication of “Brexit on the Jamaican Economy” 111 Corporate Securities Jul – Sep 2016 112 Strengthening Monetary Transmission, Fine-tuning BOJ Interest Rate Corridor 113 Developments and Trends in Credit Reporting in Jamaica Oct – Dec 2016 114 Recent Developments and Prospects for the International Oil Market 115 Jamaica’s Macroeconomic Programme under the new SBA (recurrent) Jan – Mar 2017 116 A Review of the Performance of Government of Jamaica Global Bonds 117 BOJ Signals Upgrade of FX Market Operations Apr – Jun 2017 118 BOJ’s New Foreign Exchange Intervention & Trading Tool 119 Analysis of the improving Trend in DTIs’ Non-Performing Loans for the Five Years ended December 2016 Oct – Dec 2017 120 Global Economic Growth in Selected Economies Apr – Jun 2018 121 Why Inflation was Lower than Target 122 Moody’s Investors Service Rating Action Oct – Dec 2018 123 Recent Developments and Prospects for the International Oil Market Apr – Jun 2019 124 The impact of Jamaica’s transition to LNG on electricity rates
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