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Credit expansion is one of the main agendas of the Bank of Jamaica. The private sector businesses seem to have seen a rise in terms of credit expansion. It has grown by a rate of 15.2% over the course of one year. The bank is worried about the rate at which expansion is taking place. Despite the fact that the economy is growing, the rate at which it is growing does not seem satisfying. The Governor of Bank of Jamaica, Brian Wynter, said in a recent interview that the bank has decided to take some new measures to improve the rate of growth.
Policy Rate Takes a Cut
The bank has reduced the policy rate to a mere 0.75%. This cut signifies a reduction by 50 basis points from its previous value. It is expected that this reduction will bring in more expansion in the business sector which in turn will lead to more growth and economic activity. The bank has decreased the interest rate corridor so as to complement the policy rate reduction. It was reduced to 200 basis points. The standard interest rate will be 2.75 percent per annum. This will reduce the gap between the interests obtained by the public for their deposits and the interest paid by them for the loans.
More Liquidity in the System
Another move observed by the bank is the reduction of the cash reserve requirement by almost 2 percent. The current CRR requirement is just 7%. This will improve liquidity in the market. It is likely that an additional $12.3 billion cash flow will be observed in the economy due to this change. Businesses and marketplaces will be able to get more loans and credits for various expansion works. This will be one of the main focuses of the bank. The bank is trying to ensure that they receive better terms and lower interest rates.
These policy changes are expected to increase economic activity in the country and increase the inflation rate to about 5%. Currently, the rate of inflation has been consistently below the expected target. All these changes are expected to bring in better growth in the inflation factor within a period of 3 years. Domestic agricultural prices are also likely to stabilize in the coming months. Electricity rates have seen a drastic decline in the recent past, though the food industry seems to be moving forward.