Weekly Market Aug 20-24, 2018 – Update Bank of Jamaica sells US$40M to the Market

The Bank of Jamaica (BOJ) has reiterated that it remains focused on inflation targeting whilst indicating that it has not been influencing the local currency’s value in order to drive inflation upwards. Jamaica’s point-to-point inflation was 3.2% as at July 2018, well below the BOJ’s target range of 4.00 -6.00%. Meanwhile, year-to-date, the Jamaican dollar (J$) has depreciated against its US dollar (US$) counterparty by 10.37%, after previously strengthening earlier in the year. Given that inflation remains below the target range, the BOJ has room to either keep interest rates low or reduce them further to provide stimulus to the economy. The Central Bank, however, entered the market a week before its next US$15M scheduled auction, to conduct a flash sale of US$40M today. This brought the total amount sold to the market by the BOJ for August to US$65M whilst the total purchased was US$9M. This unexpected injection of US$ liquidity by the BOJ may temper the rate of the local currency’s depreciation unless the demand for US$ and persistent liquidity of J$, offset the BOJ’s recent actions.

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