April – June 2012 Volume 13 No. 1€¦ · Bank of Jamaica Quarterly Monetary Policy Report, April to June 2012 International Developments 2 Growth in the USA slowed during the June

April – June 2012 Volume 13 No. 1

Bank of Jamaica Quarterly Monetary Policy Report, April to June 2012

Bank of Jamaica

Quarterly Monetary

Policy Report

April – June 2012

Volume 13 No. 1



© 2003 Bank of Jamaica Nethersole Place

Kingston

Jamaica

Telephone: (876) 922 0750-9

Fax: (876) 922 0854

E-mail: [email protected]

Website: www.boj.org.jm

ISSN 0799 1037

The report is available in PDF format at the Bank’s website.

Comments on this publication are welcome and can be sent directly to the Bank or to our website.


CONTENTS Preface i

Overview iii 1. International Economic Developments 1 2. Monetary Policy and Financial Markets

Money & Credit 8 Monetary Policy & Base Money Management 8

Money Supply 10 Private Sector Credit 13

Bond Market 16 Stock Market 19

Foreign Exchange Market 21

3. Real Sector Developments 23

4. Inflation 28 Box 1- The Importance of Managing Inflation Expectations 33

5. Economic Outlook and Monetary Policy Perspectives 37

Appendices

A. Fiscal Developments 44 B. Monetary Policy Developments 49 C. Summary Tables 68

Glossary 93 List of Boxes in the QMPR 98



i

PREFACE

Bank of Jamaica’s Quarterly Monetary Policy Report reviews the conduct of monetary policy and the main factors that influence inflation. It also presents the Bank’s perspective on emerging economic trends and the path of monetary policy over the short- to medium-term and features, in this issue, a discussion on The Importance of Managing Inflation Expectations (see Box 1).

The developments in the review quarter are set against policy targets

for the fiscal year, which runs from April to March. In some instances

the data used in the preparation of the report are provisional and are

therefore subject to change.


ii


iii

OVERVIEW

Recent Developments

The Bank maintained its monetary policy stance during the June 2012 quarter. This was in the context of continued weak domestic demand and uncertainties relating to the possible impact of fiscal measures and the commencement of a new programme with the International Monetary Fund. These uncertainties contributed to bouts of instability in the domestic and foreign exchange markets. In addition, the ongoing debt crisis in Europe led to uncertainties about global growth which contributed to lower oil prices as well as increased concerns about stability in the international financial markets. Against the background of the developments in the global and domestic economies, headline inflation was 1.5 per cent, at the lower end of the range which the Bank stated in the last Quarterly Monetary Policy Report. However, the outturn for the quarter was lower than the revised forecast of 3.0 per cent to 5.0 per cent which the Bank reported subsequent to the announcement of the Government’s fiscal measures. The lower-than-expected outturn was due to a lower than projected pass-through of the tax measures in June. Given the outturn for the quarter, the annual point-to- inflation was 6.7 per cent as at end-June 2012. During the review period, inflation emanated primarily from seasonal shortages in several agriculture items and tax measures implemented in June. However, the impact of these factors was tempered by lower oil prices which led to reduced costs for electricity and automotive services. The lowering of the General Consumption Tax (GCT) to 16.5 per cent was also a countervailing influence on prices in the quarter. While there was an increased pace of depreciation in the exchange rate, the pass-through to prices in the June quarter was limited because of lower international commodity


iv

prices and the weak domestic demand conditions. The foreign exchange market was characterized by significant demand pressures during the quarter. This was reflected in a depreciation of 1.57 per cent in the value of the Jamaica dollar vis-á-vis the US dollar relative to 0.80 per cent in the March 2012 quarter. The increased pace of depreciation was principally influenced by insufficient net private capital inflows to cover higher net demand for current account transactions. To augment supplies in the market, the Bank sold US$134.9 million (net) which contributed to a decline of US$236.7 million in the net international reserves (NIR) for the quarter. The NIR at end-June 2012 was US$1 540.4 million. Gross reserves of US$2 385.1 million represented 15.8 weeks of imports of goods and services at end-June. The decline in the NIR contributed to a contraction of 2.8 per cent in broad Jamaica Dollar money supply (M3J) for the June 2012 quarter, in contrast to the growth of 3.1 per cent for the corresponding quarter of 2011. The impact of the NIR on M3J was partly offset by an increase of 4.0 per cent in private sector credit. Supporting the growth in private sector credit was a continued decline in weighted average loans rates. Notably, there was a marked improvement in commercial bank loan quality during the review period. In particular, the ratio of non-performing loans to total loans, declined to 6.7 per cent from 8.4 per cent at end-March 2012. Against the background of weak domestic demand, growth in Jamaica’s real Gross Domestic Product (GDP) is estimated to have remained relatively flat. In particular, continued growth is estimated for Agriculture, Forestry & Fishing as well as Hotels & Restaurants. However, Mining & Quarrying is estimated to have declined due


v

largely to disruptions in production as well as weak global demand. Outlook

Domestic inflation is forecasted to be in the range of 1.0 per cent to 2.0 per cent for the September 2012 quarter largely similar to the outturn in the June 2012 quarter. This forecast reflects the continued impact on prices of the implementation of the tax measures. For the rest of the fiscal year the generally tight fiscal stance, coupled with overall weak domestic and international demand should constrain price increases. In addition, increases in oil prices should be moderate in the context of the relatively weak global demand. However, grains prices are expected to be elevated relative to the previous fiscal year reflecting the impact of drought conditions in the USA. In this regard, for FY2012/13 the forecast for domestic headline inflation remains in the revised forecast range of 10.0 per cent to 12.0 per cent which the Bank announced in June, with the point estimate closer to the lower bound. Real GDP growth for the September 2012 quarter is expected to remain flat. Continued growth is expected in Agriculture, Forestry & Fishing, Electricity & Water Supply and Hotels & Restaurants while Mining & Quarrying is expected to continue to contract. In this regard, growth in domestic output is projected to remain flat for the fiscal year. The growth outlook also reflects the impact of the relatively tight fiscal stance and the projection for slow expansion in the global economy. The risk to the inflation forecast is skewed to the upside while the risk to the forecast for growth is skewed to the downside. In the context of the anticipated temporary spike in inflation for this fiscal year, the Bank will continue to manage expectations to ensure the achievement of its inflation target (see Box 1: The Importance of Managing Inflation Expectations).

Table

C

Eur

SourcesQuarte

GlobaJune 2

1.

e 1.1

Selected

D

Ad

USA

Canada

Japan

UK

ro area

Emerg

China

Russia

Brazil

s: official statistics officer percentage change at

l economic grow2012 quarter

Intern

d GDP Growth

ec-11 M

dvanced Econ

4.1

1.9

0.1

0.6

0.7

ging Market E

8.9

4.8

1.4

es *Bloomberg Consensannual rates

wth is estimated t

national

h Rates***

Mar-11 J

omies

2.0

1.9

4.7

-0.2

-0.1

Economies

8.1

4.9

0.8

sus Forecasts ***Quart

o have decelerat

Develop

Jun-12

1.5

2.0*

2.0*

-0.8

-0.5*

7.6

4.1*

1.0*

ter-over-

ted during the

ments Bank

The paslowed economarea asemerginmainly r The ddownwaquarterin impodecline terms ofJune qu In the ccentral interest alleviatbanks oexpansiof a wea Market declinedincreaseof adveof growmarket Global Global June 20deceleraeconomGrowthestimate

k of Jamaica Quar

ace of global ein the June 201

mies, there wass well as deceng market ecoreflected in Ch

deceleration inard pressures r. Against this ort prices, the

in Jamaica’s eof trade (TOT)uarter.

context of weabanks in mos

t rates unchangte credit constrof some emergionary monetarak global envir

interest rated during the ed investors’ p

erse developmenwth concerns inbond yields als

Economic Groweconomic grow012 quarter reation largely r

mies, particularlh among emergied to have slow

rterly Monetary Po

Int

economic grow12 quarter. Wis an estimated eleration of gronomies, the sina.

n global ecoon some commbackground, thimpact of whicexport prices. is estimated t

aker than antict advanced ecoged and providraints in financging market ery policy measuronment.

es for US doreview quart

preference for snts in the Euron the USA. Nso fell during th

wth wth is estimateelative to the reflected the ply the Eurozoning economies,

wed during the q

olicy Report, April

ternational Develo

wth is estimateth respect to th

d contraction inrowth in the

slowdown in g

onomic growtmodity prices here was an estch was mostly In this regard,

to have improv

cipated economonomies kept tded necessary cial markets. Teconomies alsoures to mitigate

ollar-denominater, primarily safe-haven ass

o area and the Notwithstandinghe quarter.

ed to have sloprevious quar

performance ofne, the USA particularly Ch

quarter (see Tab

l to June 2012

opments 1

ed to have e advanced n the Euro USA. For

growth was

th exerted during the timated fall offset by a

, Jamaica’s ved for the

mic growth, their target liquidity to The central o employed e the effects

ated assets driven by

sets in light resurgence

g, emerging

wed in the rter. This f advanced and Japan.

hina, is also ble 1.1).


International Developments 2

Growth in the USA slowed during the June 2012 quarter.

Real GDP in the Euro area is estimated to have declined by 0.5 per cent in the June 2012 quarter following a marginal contraction of 0.1 per cent in the preceding quarter. This continued contraction mainly reflected the impact of austerity measures imposed within the area which resulted in reduced consumption and investment demand. Growth in Germany, Europe’s largest economy, is estimated to have slowed to 0.9 per cent during the June quarter relative to 1.2 per cent during the March quarter while several of the smaller economies contracted. For the USA, real GDP growth decelerated to 1.5 per cent in the June 2012 quarter, relative to an expansion of 2.0 per cent in the March 2012 quarter. This performance was underpinned by slower growth in real consumption as well as a fall in net export earnings. The moderation in real consumption spending in the June quarter reflected lower consumer purchases of durable goods in the context of weaker job market gains. The decline in export earnings was primarily influenced by reduced global demand stemming from the European debt crisis. The Japanese economy is estimated to have grown, on an annualised basis, by 1.4 per cent in the June 2012 quarter, following an expansion of 4.7 per cent in the previous quarter. This slowdown in growth reflected reduced global demand emanating from the deepening Euro area debt crisis. Additionally, an appreciation in the value of the Japanese Yen contributed to the deceleration in growth. Among the emerging market economies, real GDP growth for China decelerated to 7.6 per cent in the June 2012 quarter, relative to growth of 8.1 per cent in the previous quarter. This outturn also compares to average growth of 10.1 per cent in the previous five June quarters. The deceleration in the rate of growth reflected the impact of continued slowdown in China’s manufacturing sector, influenced by weak global demand as well as various monetary tightening measures implemented by the Chinese authorities in previous quarters.



Table 1.2

Average Unemployment Rate for Selected Economies

(Per cent changes relative to previous period)

Sept. 11 – Jun. 12

USA Canada Euro

area

Sept-11 9.1 7.3 10.2

Dec-11 8.7 7.5 10.6

Mar-12 8.3 7.4 10.9

Jun-12 8.2 7.3 11.1*

Source: official statistics offices * Bloomberg Consensus forecasts

Employment among selected advanced economies was mixed during the June 2012 quarter. Table 1.3

Source: official statistics offices

Global inflation decelerated during the June 2012 quarter.

Unemployment

Changes in the unemployment rate for selected developed

economies were mixed for the review quarter (see Table 1.2). In the

USA, the average unemployment rate fell to 8.2 per cent relative to

8.3 per cent for the preceding quarter. The outturn was the lowest

unemployment rate since January 2009 and primarily reflected a

faster decline in the number of unemployed persons as well as an

increase in the labour force. Increased employment during the

quarter was evident in temporary help services, education and health

services and transportation and warehousing. The average

unemployment rate in Canada also declined marginally to 7.3 per

cent from 7.4 per cent in the March 2012 quarter. In contrast, the

average unemployment rate for the Euro area is estimated to have

increased to 11.1 per cent from 10.9 per cent in the previous quarter.

This was the fifth consecutive quarter of increase and was primarily

associated with the implementation of various fiscal austerity

measures in some of those countries.

Inflation Inflation for all major economies decelerated during the June quarter

(see Table 1.3). In particular, the average twelve-month point-to-

point inflation rates for the UK, China and the USA fell by 1.0, 0.4

and 1.1 percentage points (pps), respectively, when compared with

the same measure in the preceding quarter. The deceleration in

inflation mainly reflected a moderation in food and energy costs, the

impact of which was partly offset by a sharp increase in some

commodity prices during the quarter.

Annual Point-to-Point Inflation for Selected Economies

(quarterly averages)

Sept. 11 – Jun. 12

USA Canad

a UK China

Euro

area

Sept-11 3.9 3.2 5.2 6.1 3.0

Dec-11 3.0 2.3 4.7 4.1 2.7

Mar-12 2.7 1.9 3.5 3.6 2.7

Jun-12 1.7 1.5 2.4 2.2 2.4



The impact of lower crude oil prices on the IPI was partly offset by increases in agricultural commodity prices in the June 2012 quarter.

Table 1.4

Source: IMF Pink Sheets

* Tourism Implicit Price Index, **Aluminium is the proxy used for alumina prices

Jamaica’s Terms of Trade

Jamaica’s terms of trade (TOT) is estimated to have improved marginally for the June 2012 quarter relative to the March 2012 quarter (see Table 1.4).1 This compares to an average decline of 5.2 per cent over the past five June quarters. However, on an annual basis, the TOT is projected to have increased by 5.5 per cent. The outturn during the review quarter reflected a decline of 3.7 per cent in the Import Price Index (IPI), the impact of which was mostly offset by a 3.6 per cent fall in the Export Price Index (EPI). The fall in the IPI occurred in the context of a 9.2 per cent decline in

crude oil prices which averaged US$93.50 per barrel (bbl) for the

review quarter. This decline compares favourably to a five-year

seasonal average increase of 17.0 per cent for the June quarter. The

reduction in crude oil prices largely stemmed from an intensification

of the sovereign debt and banking crisis in the Euro area, particularly

in Spain, Greece and Italy. Weak global demand, reflected in US

crude oil inventories rising to the highest level since 1990, also

influenced the fall in prices. Furthermore, the easing of geopolitical

tensions between Iran and Western nations amid diplomatic talks

during the quarter contributed to the reduction in prices. The impact

of the decline in crude oil prices on the IPI was, however, partially

offset by higher agricultural raw material prices for the period.

Increases in agricultural commodity prices reflected the impact of

persistently dry weather conditions on grains supplies in the US

Midwest during the latter part of the quarter despite record planting

of corn in the USA. Rice prices continued to rise in the context of

an extension to the Thai government’s rice-buying programme

which began in September 2011 in support of farmers in that

country. In this regard, the Bank’s agricultural raw material sub-

index rose by 3.5 per cent primarily reflecting increases of 10.4 per

cent and 7.2 per cent in average soybean and rice prices,

respectively. The impact of these increases was partly offset by

respective declines of 2.7 per cent and 3.2 per cent in corn and wheat

prices.

1 The quarterly TOT index is measured by a 3-month average of BOJ’s monthly index over the referenced period.

Selected Import/Export Prices (period averages)

(Per cent changes relative to previous period)

Dec-11 Mar-11 Jun-12

TOT 0.5

5.7 0.1

IPI 0.1

4.5 -3.7

Crude Oil 4.8 9.4 -9.2

Soybeans -11.1 6.0 10.4

Corn -10.9 3.1 -2.7

Rice 5.9 -9.3 7.2

Wheat -9.6 1.4 -3.2

EPI 0.7

9.3 -3.6

Aluminium** -13.3 5.0 -8.9

TIPI* -0.4 8.3 0.6



Table 1.5

a Benchmark lending rate b Refinancing rate c Repo rate d Special System of Clearance and Custody (SELIC) rate

Table 1.6

Source: Central Banks

a Benchmark lending rate b Refinancing rate c Repo rate d Special System of Clearance and Custody (SELIC) rate

The contraction in the EPI can be ascribed to declining alumina prices. Aluminium prices, the proxy for alumina prices, fell by 8.9 per cent for the quarter, consistent with a deceleration in manufacturing activity and global growth concerns particularly in China, a major consumer. The impact of this decline was tempered by a marginal rise in the Bank’s Tourism Implicit Price Index, principally reflecting an increase in average tourist expenditure attributable to growth in arrivals. This increase in arrivals resulted from increased airlift from major source markets including the USA and Canada.

Monetary Policy

Central banks of major advanced economies kept their target interest rates unchanged during the March 2012 quarter (see Table 1.5). This was in the context of the need to stimulate growth in these economies. In addition, the European Central Bank (ECB) extended its longer-term refinancing operation (LTRO) until the end of 2012 in an effort to enhance liquidity conditions in the Euro area. The Federal Reserve Bank (the Fed) also continued its monetary policy measures of reducing long-term borrowing costs by increasing the duration of its portfolio. Most central banks in emerging market economies implemented various expansionary monetary policy measures during the quarter. In particular, the Peoples’ Bank of China loosened monetary policy by lowering the reserve requirement for deposit-taking financial institutions by 50 basis points (bps) in order to inject additional liquidity into China’s financial system. The Reserve Bank of India reduced its target repo rate by 50 bps to address structural pressures on liquidity while the Central Bank of Brazil lowered its Selic rate by 50 bps to 8.50 per cent as a means of mitigating the effects of a restrictive global environment (see Table 1.6).

Selected Benchmark Interest Rates: Advanced Economies

Mar. 12 – Jun. 12

USAa UKb Euro

areab Japanc Canadad

Mar. 0 - 0.25 0.50 1.00 0.10 1.00

Apr. 0 - 0.25 0.50 1.00 0.10 1.00

May 0 - 0.25 0.50 1.00 0.10 1.00

June 0 - 0.25 0.50 1.00 0.10 1.00

Selected Benchmark Interest Rates: Emerging Economies

Dec. 11 – Mar. 12

Chinaa Russiab Indiac Brazild

Mar. 6.56 8.00 8.50 9.75

Apr. 6.56 8.00 8.00 9.00

May. 6.56 8.00 8.00 8.50

Jun. 6.25 8.00 8.00 8.50

Source: B

Table

Source: B

Se

De

Ma

Ju

Bloomberg

e 1.7

British Bankers’ Associ

Selected M

(pe

3‐mon

U

LIB

ep‐11 0

ec‐11 0

ar‐12 0

un‐12 0

Figure 1.1US Treasury Yield

iation

Market Interes

eriod averages

nth

USD

OR

3‐mon

U

Treasu

b

.30 0.0

.48 0.0

.51 0.0

.47 0.0

1 d Curve

st Rates

s)

th

US

ury

bill

TE

Sprea

(bps

02 27.

01 46.

07 44.

09 37.

D

ad

s)

.3

.6

.5

.8

Bank

SelectedOver thfor US precedinon longcent. T0.13 perThe moof the demanddeteriorbanking Credit rperiod. and theof this previoureducedthe easiGreece implem EmerginThe ave

declined

on GOJ

the quar

by reduc

denomin

the spre

(USTB)

widened

per cent

assets.

2 The Fedto lower lobonds andon the lon

k of Jamaica Quar

d Interest Rateshe quarter, the a

Treasury billsng quarter. Th

ger term bonds, The average yier cent relative t

ovement in averFed’s ongoing

d for the relatirating equity mg crisis in Spain

risk in US finan The average sp

e 3-month US Trisk, fell by 7

us quarter (seed concerns in ting of uncertaas well as spec

ment measures to

ng Market Bonerage yield on t

d marginally by 1

global bonds (G

rter. Lower yiel

ced concerns ab

nated bond whic

ead between th

as well as the sp

d by 17 bps and 3

t, respectively,

deral Reserve implemong-term interest ratd bought long-term Tng-term bond yields.

rterly Monetary Po

Int

s average yield ons declined relathis outturn largwhich fell by 1

eld on short-terto the precedingrage yields part

g Operation Twive safety of U

markets in the Un during the qua

ncial markets dpread between Treasury bill (Tbps to averag

e Table 1.7). the second halfainty surroundinculation that tho stem the debt

nds the emerging m

1 bp to 5.53 per c

GOJGB) fell by 1

lds on the GOJG

bout the GOJ’s

ch matured in Ju

he EMBI+ and

pread between y

3 bps, respective

as investors gra

mented Operation Twtes. In this operationTreasury bonds aime

olicy Report, April

ternational Develo

n secondary mative to the avergely reflected lo16 bps to averarm bonds rose bg quarter (see Ftially reflected wist as well asUS Treasuries

USA and the imarter.2

declined duringthe 3-month U

TED spread), ae 37.8 bps rela This declin

f of the quarterng political lea

he Eurozone leat crisis in the ne

market bond inde

cent, while the a

5 bps to 7.61 per

GBs were mainly

ability to financ

uly 2012. Notw

US Treasury b

yields on GOJGB

ely to 3.69 per c

avitated towards

wist in September 20

n, the Fed sold short-ed at placing downw

l to June 2012

opments 6

arket trades rage of the ower yields age 1.62 per by 3 bps to

Figure 1.1). the success s increased in light of

mpact of the

g the review USD LIBOR an indicator ative to the

ne reflected r following adership in

aders would ear-term.

ex (EMBI+)

average yield

r cent during

y influenced

ce the Euro-

withstanding,

bond yields

B and USTB

ent and 5.77

safe haven

011 in an effort -term Treasury

ward pressure

S

S

Source: Bloomberg

Figure 1.2Selected Stock Mark

2 ket Indices

Bank

Equities

The maj

largely r

of financ

the USA

& Poor’

respectiv

declined

declined

ForeignThe USduring tdollar dcent, reby 0.7 preflectetrading particulemerginMexicarespectiprices d

k of Jamaica Quar

s

jor stock market

reflecting reduce

cial instability a

A, the Dow Jones

s 500 index (S&

vely. The FTS

d by 3.4 per cent

d by 10.7 per cen

n Exchange MaS dollar strengthe review peridepreciated by espectively, whper cent. The

ed the impact opartner as

larly during thng market currean peso depreciively, largely dduring the quart

rterly Monetary Po

Int

t indices decline

ed investor prefer

associated with t

s Industrial Aver

&P 500) fell by 2

SE 100 Index, t

t. Japan’s main

nt (see Figure 1.2

arket gthened againsod. The Euro, 2.2 per cent,

hile the Great Bmovement in t

of slower growwell as finan

he first half oencies such as tiated by 9.9 pdue to lower oter.

olicy Report, April

ternational Develo

ed during the re

rence for risky a

the European deb

rage (DJIA) and t

2.5 per cent and

the UK’s main

n index, the Nikk

2)

st most major the Yen and th1.0 per cent a

British Pound these currencie

wth in China, tncial market

of the quarter. the Brazilian Rer cent and 4.oil and other

l to June 2012

opments 7

eview period

ssets in light

bt crisis. In

the Standard

3.3 per cent,

index, also

kei 225, also

currencies he Canadian and 0.9 per appreciated

es primarily their major instability, Notably,

Real and the 1 per cent, commodity

Interes

Table 2.1

Inflation (% Chang

Gross For(US$MN.

6.06.57.07.58.08.59.09.5

10.010.5

Pe

r C

ent

Fst rate on BOJ 3

1

ge)

reign Assets (eop).)

Selected E

2. M

0505050505

Figure 2.1 30-day Certificat

Outturn Jun'12

Quarter

Pro

Q

1.5

2 385.1 2

Economic Indicator

Monetary

te of Deposit

ojection Jun'12

Quarter

Target for

FY12/13

3.0-5.0 10.0-12.0

2 347.8 2 642.1

rs

Policy an

B

MonMonThequarunceInterreveinflathat give In thexpadecequar

Duriwas an auncemarkrate upticenhaBankthe domthe icent was quarmain

nd Finan

Bank of Jamaica

ney & Credit netary Policy anBank maintain

rter. This dertainties surrornational Mone

enue measures ation for FY201

the inflationarn protracted we

he context of thanded by 0.8 peeleration relativrter.

ing the June 2characterized b

agreement withertainty was inket as well as risks. In additick in inflation ancing measurek’s assessment,tax measures

mestic demand. interest rate on

(see Figure 2also kept con

rter, while the ntained at 12.0

ncial Mar

Quarterly Mone

nd Base Moneyed its monetary

decision occurrounding the tetary Fund (IM

in the budge12/13. Howevery impact of theak domestic de

hese weak demer cent during ve to the 2.1 p

2012 quarter, thby continued unh the Internationdicated by inincreases in in

tion to these devgiven the anno

es for the FY20, however, indi would be teIn this contextits 30-day Cer

2.1). The rate nstant at 0.25 p

cash reserve aper cent and 26

rkets

etary Policy Repo

y Management y policy stance red in the ctiming of an MF). In additiet, there is aner, the Bank’s hese measures

demand.

mand conditionsthe June 2012

per cent record

he domestic ecncertainty surroonal Monetarynstability in th

ndicators of sovvelopments theounced implem012/13 budget (icated that the iemporary, givt, the BOJ mainrtificate of Depon the Bank’s per cent througand liquid asse6.0 per cent, res

ort, April to June

during the Junontext of conagreement wi

ion, arising fron expected uptassessment indwould be temp

s, the monetaryquarter, a sign

ded for the June

conomic enviroounding the timy Fund (IMF). he foreign excvereign and excere was an anticmentation of rev(see Table 2.1)inflationary imp

ven protracted ntained its policosit (CD), at 6.overnight instrghout the Junets requirementsspectively.

e 2012

8

e 2012 ntinued ith the om the tick in dicated porary

ry base nificant e 2011

onment ming of

This change change cipated venue-). The pact of

weak cy rate, .25 per rument e 2012 s were


Monetary Policy and Financial Markets 9

Figure 2.2 Base Money (Quarterly Change)

Figure 2.3 Effects of the NIR, GOJ & OMO on Liquidity*

* Absorption – negative; Injection – positive

Table 2.2

The monetary base expanded by $640.7 million (0.8 per cent) during the June 2012 quarter (see Table 2.2). This marginal increase was in comparison to an expansion of $1.6 billion (2.1 per cent) for the June 2011 quarter (see Figure 2.2). The expansion in the monetary base for the review quarter reflected net currency issue of $368.2 million (0.7 per cent) and an increase of $333.1 million (1.1 per cent) in the commercial banks’ cash reserves. These impulses were partially offset by a decline of $60.6 million in the commercial banks’ current account. The less than robust increase in currency, relative to growth of 1.1 per cent in the June 2011 quarter, was consistent with an estimated deceleration in economic activity for the quarter under review.

For the review quarter, the increase in the monetary base was largely influenced by a net maturity of $33.2 billion in open market operation (OMO) instruments, particularly the Bank’s 30-day CD. This unwinding of OMO instruments facilitated participation in the Government’s debt-raising activities and financed the purchase of foreign currency via the Bank’s trading window. The proceeds from the Government’s debt-raising activities contributed to a net build-up of $14.2 billion in Central Government deposits at the Bank (see Bond Market). Concurrently, intervention sales to the market as well as debt payments on behalf of the Central Government underpinned a decline of $21.2 billion (US$236.7 million) in the NIR (see Figure 2.3 and Foreign Exchange Market).

Outturn Mar'12 Quarter

Outturn Jun'12

Quarter

% Change

Net International Reserves 1 777.1 1 540.4 -13.3(US$ MN.)

Net Domestic Assets(J$MN.) -75 089.9 -53 299.2 29.0

Monetary Base(J$MN.) 83 696.7 84 337.4 0.8

Base Money Indicators

-25000

-15000

-5000

5000

15000

25000

35000

J$ M

illio

n

NIR OMO GOJ

-15.0

-5.0

5.0

15.0

25.0

Jun-08 Jun-09 Jun-10 Jun-11 Jun-12

Per

cen

t

Quarter

Unadjusted Seasonally adjusted



Figure 2.4 Money Supply

(Quarterly Growth Rates) June 2006 to June 2012

‐6.0‐4.0‐2.00.02.04.06.08.010.012.0

Per Cent

M3J M3*

Table 2.3

Figure 2.5

Deposits in Commercial Banks (Quarterly Growth Rates) June 2009 to June 2012

Money Supply

Broad Jamaica Dollar money supply (M3J) declined by 2.8 per cent during the June 2012 quarter in contrast to the growth of 3.1 per cent for the corresponding quarter of 2011. The reduction in M3J occurred in the context of continued weak domestic demand conditions.

The measure of money supply that includes foreign currency deposits, (M3*), declined by 2.4 per cent for the quarter in contrast to an increase of 2.7 per cent for the corresponding quarter of 2011.3 Within M3*, foreign currency deposits fell by 1.3 per cent relative to growth of 1.5 per cent for the June 2011 quarter. Notwithstanding the decline in foreign currency deposits at end-June 2012, the level of dollarization as measured by the ratio of foreign currency deposits to total deposits was above the ratio at end-March 2012.

For the June 2012 quarter, broad Jamaica Dollar money supply (M3J) fell by 2.8 per cent. This reduction was in contrast to the increase of 3.1 per cent for the June 2011 quarter and average growth of 3.6 per cent for the last five June quarters (see Figure 2.4). The contraction in the review quarter constrained annual growth in M3J to 2.6 per cent as at June, well below the average of 9.6 per cent for the corresponding period of the last five years (see Table 2.3). The decline in money supply during the June 2012 quarter reflected dividend payments by the financial sector as well as the impact of continued weak domestic demand conditions (see Real Sector). The main source of contraction in M3J for the review quarter was a decline of $21.2 billion in the NIR relative to the reduction of $25.6 billion for the corresponding quarter of 2011. In addition there was a reduction in banking system credit to the public sector. The impact of these declines was partially offset by a net unwinding of BOJ Certificates of Deposit (CDs) of $33.2 billion (29.8 per cent) relative to a net amortization of $8.3 billion (5.8 per cent) in the June 2011 quarter (see Base Money Management). There was also moderate growth of.

3 M3* is comprised of M3J and foreign currency deposits.

Money Supply (12-month growth rates)

MJ Jun-11 Jun-12 M1J 9.8 2.3

M2J 6.5 1.6

M3J 7.6 2.6

M*

M1* 8.1 3.7

M2* 2.8 2.1

M3* 4.3 2.8

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

Per

Cen

t

Local Currency Foreign Currency

Local Currency (5 -yr avg.) Foreign Currency (5-yr avg.)



Table 2.4

Jun-11 Jun-12Local Currency Deposits 3.3 -3.4

Demand deposits 7.1 0.8

Savings deposits 2.1 0.0

Time deposits 1.1 -0.9

Other Deposits 3.0 -9.2

Local Currency DepositsQuarterly Growth ( %)

$10.0 billion (4.0 per cent) in private sector credit, continuing the trend observed since the start of 2011. The reduction in money supply during the June 2012 quarter was reflected in a decline of 3.4 per cent in local currency deposits as currency in circulation increased marginally by 0.8 per cent. The decline in local currency deposits was in contrast to the increase of 3.3 per cent in the corresponding quarter of 2011 and average growth of 3.6 per cent for the last five June quarters. This reduction for the review quarter was mainly reflected in other deposits which declined by 9.2 per cent given a dividend payment by a commercial bank to its parent company (see Table 2.4). Movements in the other components of local currency deposits were negligible. Currency in circulation, the other component of M3J, increased marginally by 0.8 per cent, and was well below the expansion of 2.2 per cent in the corresponding quarter of 2011 as well as the average growth of 3.5 per cent for the last five June quarters. For the 12-month ended June 2012, there was a real decline of 0.7 per cent in currency in circulation in contrast to the real increase of 2.2 per cent for the corresponding period ended June 2011. The real decline in currency may be attributed to the weak spending activities within the economy against the background of lower disposable income stemming partly from rising unemployment and a decline in real wages (see Real Sector). For the review quarter, M3* declined by 2.4 per cent in contrast to an increase of 2.7 per cent for the June 2011 quarter (see Figure 2.4). Within M3*, foreign currency deposits declined by 1.3 per cent following growth of 6.9 per cent in the March 2012 quarter. The reduction in foreign currency deposits during the review quarter was largely reflected in time deposits of business firms. There were also declines in the savings deposits of individuals and non-profit organizations. At end-June 2012, the ratio of foreign currency deposits to total deposits was 27.9 per cent relative to 27.4 per cent at end-March 2012 and 27.6 per cent at end-June 2011 (see Figure 2.6). The increase at end-June 2012 occurred in a context of a faster decline in total deposits relative to the reduction in foreign currency deposits.



Figure 2.6 Foreign Currency Deposits to Total Deposits

June 2009 to June 2012

Table 2.5

Table 2.6

The money multiplier corresponding to M3J was 4.01 at end-June 2012 relative to 4.16 at end-March 2012. This decline reflected increases in both the currency to deposit and the reserve to deposit ratios (see Table 2.5). The increase in the currency-to-deposit ratio was largely as a consequence of a faster decline in total deposits relative to the marginal increase in currency. Commercial banks’ weighted average deposit rate decreased by 6 basis points (bps) to 2.14 per cent for the June 2012 quarter. This reduction largely reflected a decline in the interest rate paid on demand deposits (see Table 2.6). In contrast, the weighted average foreign currency deposit rate increased by 3 bps to 1.42 per cent, largely reflecting an increase in the interest rate paid on time deposits.

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

Pe

r ce

nt

Jun-11 Mar-12 Jun-12

WEIGHTED AVERAGE

Domestic Currency

Overall 2.51 2.20 2.14

Demand 1.87 1.36 1.30

Savings 2.08 1.82 1.83

Time 4.20 5.86 5.92

Foreign Currency

Overall 1.29 1.39 1.42

Demand 1.02 0.91 0.75

Savings 0.72 0.74 0.72

Time 2.58 2.73 2.54

BOJ 30-DAY CERTIFICATE

OF DEPOSIT RATE 6.75 6.25 6.25

COMMERCIAL BANK DEPOSIT RATES INTEREST RATES IN THE DOMESTIC MARKET

Jun-11 Mar-12 Jun-12

Currency to Deposits (%) 15.53 15.77 16.44

Reserves to Deposits (%) 12.68 12.05 12.57Money Multiplier 4.10 4.16 4.01

COMPONENTS OF THE MONEY MULTIPLIER (M3J)

Quar

Table 2.7

Total PChange of whichLoans an

DomeOvers

Corpora

Table 2.8

BusinesAgricult

Mining &

Manufac

Constru

Transpo

Tourism

Distribut

Professi

Electricit

Entertain

PersonaPersona

Oversea

Net Len

Frterly Growth Rate

June 2005

rivate Sector Credi(%)

hnd Advancesestic residentsseas residentsate Securities

Commercial Total Credit

(Quarter

ss Lendingture & Fishing

& Quarrying

cturing

ction & Land Dev.

ort, Storage & Comm

m

tion

ional & Other Servic

ty, Gas & Water

nment

al & Other Lendingl

as Residents

ding/(Repayment)

(Quart

Commercia Total Loans & A

Figure 2.7 es of Private Sectoto June 2012

Jun-11

it 2 312.71.1

2 318.92 216.1

102.896.5

Bank Distributioto the Private Se

rly Flows J$MN)

Jun-11 M

-1 997.6 419.7

49.2

-99.8

33.9

m. 149.9

313.5 -

-1 849.4

ces -651.9

34.4

2.9

g 4 316.5 44 213.7

102.8

2 318.9 9

terly Flows J$MN)

al Bank DistributioAdvances to the Priv

r Credit

Mar-12 Jun-1

9 186.1 10 027.3.9 4.

9 244.7 10 540.9 235.4 10 498.

9.3 41.4-49.3 -471.

on of ector

Mar-12 Jun-12

4 955.9 1 036.9984.0 -925.5

-74.3 -20.5

419.0 1 251.9

1 508.5 -949.8

-493.8 367.6

-1 565.8 -2 848.2

4 559.5 2 336.4

-839.1 1 373.9

397.0 354.9

60.9 96.2

4 288.8 9 503.44 279.5 9 462.0

9.3 41.4

9 244.7 10 540.3

on of vate Sector

Ba

2

70

3941

2

95

5

9

8

6

2

4

9

9

2

40

4

3

PrivatCredit 2012 qincreasfor thethe precredit outpacpartly accompto tota

For thegrew baveragin parti Withinmillion$2 318Growth(8.0 peUS$42in lend BusineLoans millionmargin5.6 perto net quarterDistribwere nand Ag The eDistriband 2.re-fina

ank of Jamaica Q

te Sector Crediextended by c

quarter recordse of 1.1 per c

e review quarteevious five Junand to a less

ced that for businfluenced by

panied by a ful loans.

e quarter endedby 4.0 per centge expansion oficular the 1.1 p

n private secton (4.2 per cent)8.9 million (1.1h in the reviewer cent) in loc

2.9 million (4.3ding was mainly

ess Lending and advances

n (0.8 per cennal increase folr cent. Howevrepayments of

r. The expanbution, Professnet repayments griculture & Fi

expansions in bution were lar10). In particu

ancing and the p

Quarterly Moneta

Mone

it commercial banded growth of cent for the Juner was higher thne quarters. Buser extent termsinesses. The ey lower weighrther reduction

d June 2012, tht (see Table 2.7f 3.4 per cent fper cent growth

or credit, loans) for the review per cent) for t

w quarter refleccal currency, p3 per cent) in foy reflected in pe

extended to thnt) for the revllows two cons

ver, the growth f $1 997.6 milnsion in businesional & Other

from Tourismishing.

credit to Prrgely denomina

ular, new loans wprovision of wo

ary Policy Repor

etary Policy and

nks to the privf 4.0 per cent,ne 2011 quartethan the averaguoyed by a mam loans, growtexpansion in pr

hted average ln in the ratio of

he stock of cred7). This increafor the previousfor the June 20

s and advancew quarter compathe June 2011 qcted net lendinpartially offset oreign currencyersonal loans.

he business seview quarter (secutive quartefor the review lion (1.6 per cess lending wr Services and M

m, Construction

rofessional & ated in local cuwere extended

orking capital. G

rt April to June 2

d Financial Mark

vate sector for in compariso

er. Notably, thege rate of expanrked rise in insth in personalrivate sector crlending rates aof non-performi

dit to the privaase was higher s five June qua011 quarter.

es grew by $1ared with an incquarter (see Ta

ng of $12 989.6by net repaym

y loans. The e

ctor grew by $see Table 2.8

ers of growth aquarter was in

cent) for the Juas largely reflManufacturing

n & Land Deve

Other Serviurrency (see Tato DistributionGrowth in

2012

kets 13

the June on to an e growth nsion for stallment l lending redit was and was ing loans

ate sector than the

arters and

10 540.3 crease of

able 2.8). 6 million ments of xpansion

$1 036.9 8). This averaging n contrast une 2011 lected in g. There elopment

ices and ables 2.9 n for loan

Bank of Jamaica Quarterly Monetary Policy Report April to June 2012


Table 2.9 Table 2.10

Manufacturing was related to two sub-industries: Food & Other Drink as well as Other Manufactures. Personal and Other Lending Personal & Other lending expanded by $9 503.4 million (8.3 per cent) for the review quarter (see Table 2.8). Of note within this category, personal loans expanded by $9 462.0 million (8.9 per cent). The expansion in Personal loans for the review quarter was significantly higher than the average growth of 3.2 per cent for the previous five June quarters and was reflected solely in local currency denominated loans. Within personal loans, installment credit expanded by $3 572.3 million (10.5 per cent), the sharpest quarterly growth since the June 2009 quarter. This increase was largely reflected in loans for debt consolidation and motor cars which grew by 21.4 per cent and 7.3 per cent, respectively (see Table 2.11). Growth in term loans for the June 2012 quarter was also faster than that for the corresponding quarter of 2011. Credit card receivables increased by $1 037.6 million (5.0 per cent) for the June 2012 quarter, marginally higher than the growth rate observed in the corresponding quarter of 2011. Interest Rates The trend decline in the weighted average lending rates of commercial banks continued into the June 2012 quarter. In particular, the weighted average rate on private sector loans fell by 35 basis points (bps). This movement contributed to a decline in the overall weighted average rate by 34 bps to 17.36 per cent (see Table 2.12).

The decline in the weighted average lending rate on private sector loans for the review quarter was reflected in all categories, with the sharpest fall in mortgage financing rates. Specifically, the weighted average mortgage financing rate declined by 194 bps in the June 2012 quarter. The overall decline in the weighted average lending rate to the private sector largely reflected the impact of increased competition in the mortgage financing and personal loans segments of the domestic bank lending market.

Jun-11 Mar-12 Jun-12Business Lending -11.3 10.1 -43.7Agriculture & Fishing 0.1 1.2 -5.9Mining & Quarrying 0.0 0.1 0.0Manufacturing 1.5 -6.9 5.2Construction & Land Development 0.0 3.2 -9.3Transport, Storage & Comm. -2.3 -1.1 -4.0Tourism 1.3 -17.1 -27.7Distribution -9.7 34.1 3.5Electricity, Gas & Water -0.4 1.6 1.4Entertainment 0.1 1.0 -0.2Professional & Other Services -2.0 -6.0 -6.6

Personal & Other Lending 5.2 -7.1 0.8Personal 3.9 -4.2 -1.0Overseas Residents 1.3 -2.9 1.8

Total Net Lending/(Repayment) Flows -6.1 2.9 -42.9

Commercial Bank Distribution of Foreign Currency Loans & Advances to the

Private Sector (Quarterly Flows US$MN)

Jun-11 Mar-12 Jun-12Business Lending -1 064.7 3 470.6 3 748.8Agriculture & Fishing 6.7 867.1 -430.7Mining & Quarrying 51.8 -82.9 -20.4Manufacturing -226.2 1 003.4 763.8Construction & Land Dev. 23.4 1 107.4 -350.6Transport, Storage & Comm. 347.3 -452.0 620.8Tourism 184.5 -309.3 -812.6Distribution -1 027.2 1 516.8 1 840.6Professional & Other Services -482.2 -368.4 1 869.7Electricity, Gas & Water 66.2 216.2 153.5Entertainment -9.0 -27.8 114.8

Personal & Other Lending 3 862.2 4 802.5 9 240.7Personal 3 877.9 4 595.1 9 458.7Overseas Residents -15.7 207.4 -218.0

Net Lending/(Repayment) 2 797.5 8 273.1 12 989.6

(Quarterly Flows J$MN)

Commercial Bank Distribution of Local Currency Loans & Advances to the Private Sector

Table 2.11

CreditChange

Term LChange

InstallChange

of whicMotoChang

DebtChang

Table 2.12

Overall

Public Sect Local Go Public En Central G

Private Sec Instalmen Mortgage Personal Commer

(

1

t Card Receivables(%)

Loans(%)

lment Credit(%)

chor Carsge (%)

t Consolidationge (%)

CommercialSelected Pers

(Fl

2

Jun

20.10

tor 10.13ovt. & Other ntities 10.17Government 10.12

ctor 20.54nt 20.20e 15.05

25.48cial 15.91

Lending

CoDomestic Cu

FCommercial B

(Three Months aJune 201

Jun-11 Ma

765.94.0% 0

1 950.5 2 67.9% 8

1 525.9 74 5.2% 2

42.7 50.4% 4

1 189.8 119.6% 1

l Bank Distribution osonal Loans Categorilows J$MN)

Sep Dec

0 18.34 18.03

3 10.40 9.98

7 11.14 10.612 10.12 9.77

4 18.65 18.310 19.56 19.205 13.40 12.368 21.73 21.661 15.12 14.63

g Rates by Loan TypePer Cent

2011

ommercial Bankrrency Average Weighted

Figure 2.8 Bank Past due Land over) to Tota10 to June 2012

ar-12 Jun-12

34.0 1 037.60.2% 5.0%

60.6 2 899.98.4% 8.5%

48.0 3 572.32.2% 10.5%

63.8 890.94.8% 7.3%32.5 2 033.3

1.4% 21.4%

of ies

Mar Jun

17.70 17.36

9.85 9.62

9.95 10.039.80 9.48

17.96 17.5818.92 18.5612.20 10.2621.57 21.1714.05 13.69

2012

Loans al Loans

Ba

Loan QThere the revprivate2012 anon-peper cen2011.

4 Non-p

ank of Jamaica Q

Quality was marked im

view quarter. Ae sector loans wand 9.0 per cenerforming loansnt from 8.4 per

performing loan

Quarterly Moneta

Mone

mprovement in cAt end-June 201was 7.4 per cennt at end-June s to total loans cent at end-Ma

ns are loans past

ary Policy Repor

etary Policy and

commercial ban12, the ratio of nnt relative to 9.3

2011 (see Figuat end-June 20

arch 2011 and 7

due for 3 month

rt April to June 2

d Financial Mark

nks’ loan qualitnon-performing3 per cent at enure 2.8).4 The012 also declin7.9 per cent at

hs or more.

2012

kets 15

ty during g loans to nd-March e ratio of ed to 6.7 end-June



Table 2.13

Issue Date Tenor Avg. yield Amount AmountAllotted Maturing

(days) (%) (J$MN) (J$MN)

21-Mar-12 28 6.24 400.0 400.021-Mar-12 91 6.27 400.0 400.021-Mar-12 182 6.47 400.0 400.0

18-Apr-12 28 6.20 400.0 400.025-Apr-12 91 6.19 400.0 400.025-Apr-12 182 6.44 400.0 400.0

16-May-12 28 6.19 400.0 400.016-May-12 91 6.25 400.0 400.016-May-12 182 6.39 400.0 400.0

20-Jun-12 28 6.18 400.0 400.020-Jun-12 91 6.26 400.0 400.020-Jun-12 182 6.47 400.0 400.0

Treasury Bill Auctions and MaturitiesMarch 2012 - June 2012

2.03.04.05.06.07.08.09.0

10.011.0

%

Figure 2.9Average Private Money Market Rates

January 2012- June 2012

O/N 30-day I/B

Bond Market

During the June 2012 quarter, movements in market-determined interest rates were mixed. The average yields on the GOJ 30-day and 90-day Treasury Bills declined over the quarter while the average yield on the 180-day Treasury Bill remained flat. Within the private money market, the average inter-bank rate increased, predominantly influenced by increased concentration of liquidity in a few institutions as well as the impact on liquidity of GOJ debt-raising activities and the BOJ’s sales of foreign currency to the market. There were net placements on GOJ debt instruments for the review quarter reflecting the issue of four debt instruments. Subscriptions to these bonds were largely supported by net maturities from BOJ securities. There was continued preference for variable rate instruments by investors during the review quarter, arising from several concerns. These concerns were associated with an increased pace of depreciation of the Jamaica Dollar, the adequacy of the Bank’s gross reserves as well as the delay in securing a borrowing programme with the International Monetary Fund (IMF). The average yields on GOJ global bonds trended downwards during the review quarter. This occurred in a context of reduced concerns about the GOJ’s ability to finance the Euro-denominated bond which matured in July 2012.

There was a general decline in the average yields on GOJ Treasury Bills during the June 2012 quarter. The average yield on the 30-day and 90-day Treasury Bills fell by 6 basis points (bps) and 1 bp, respectively, relative to March 2012. The average yield on the 180-day Treasury Bill remained flat relative to the previous quarter (see Table 2.13). These outturns reflected investors’ preference for short-term investments given concerns about the acceleration in the rate of depreciation of the Jamaica Dollar, the adequacy of the Bank’s gross reserves, the GOJ’s financing plans for the maturity of the Euro-denominated bond in July as well as the status of Jamaica’s Stand-By Arrangement with the IMF. At the end of the review quarter, the average yield on the 30-day Treasury Bill was 7 bps below the yield on the Bank’s corresponding OMO instrument. Private money market rates showed mixed results during the quarter. There were declines in the average overnight (O/N) and 30-day repo rates while the inter-bank rate (I/B) trended upwards. The O/N rate averaged 3.60 per cent,



Table 2.14

Amount Amount NetAllotted Maturing Issues(J$MN) (J$MN) (J$MN)

Treasury Bills 3 600.0 3 600.0 0.0Fixed Rate Benchmark Inv. Note 715.2 0.0 715.2Var. Rate Benchmark Inv. Note 25 140.5 0.0 25 140.5TOTAL 29 455.7 3 600.0 25 855.7

GOJ Public Domestic Debt RaisingApril - June 2012

Table 2.15

(J$MN)April - June 2012Placements 223 523.1Maturities 251 922.4Net Placements -28 399.3

January - March 2012Placements 285 992.0Maturities 271 082.8Net Placements 14 909.2

Placements and Maturities in BOJ's 30-day OMO Instrument

0.001.002.003.004.005.006.007.008.009.00

10.00

Figure 2.10GOJ Global Bond Yields

January 2012 - June 2012

GOJGB Average Yield 2015 USD denom. 2017 USD denom.

2019 USD denom. 2012 Euro denom. 2014 Euro denom.

down from 3.90 per cent for the March 2012 quarter, while the 30-day repo rate decreased to an average of 6.30 per cent, relative to 6.40 per cent for the previous quarter (see Figure 2.9). The decline in the 30-day repo rate reflected a convergence towards the rate on the BOJ’s 30-day Certificate of Deposit (CD). In contrast, the average inter-bank rate increased to 3.90 per cent in the June 2012 quarter from 3.50 per cent in the previous quarter. This increase reflected the impact of tight Jamaica Dollar liquidity due to a concentration of funds in a few institutions, BOJ’s foreign currency sales as well as GOJ debt-raising operations during the quarter. The Government net issued approximately $25.9 billion in domestic debt for the quarter, in contrast to a net redemption of $7.7 billion for the March 2012 quarter. Four instruments were issued during the quarter, two of which were primary: (i) Fixed Rate (FR) 7.25% BMI note due 2015 and (ii) Variable Rate (VR) 7.50% BMI note scheduled to mature in 2014 (see Appendix, Table 8). Both issues were unlimited. For the fixed rate instrument, the coupon compares to 7.20 per cent on a similar offer in the previous quarter. In relation to the VR instrument, the re-pricing margin was set at 1.375 percentage points above the yield on 90-day Treasury Bills, compared to a similar margin above 180-day Treasury Bills in the previous quarter. A total of three VR BMI notes were issued, representing 97.0 per cent of gross financing for the period (see Table 2.14). The preference for VR instruments reflected investor uncertainty about the impact of Government’s FY2012/13 budget on the economy. Facilitating the net placement on the GOJ instruments was an overall net maturity of $28.4 billion on the Bank’s 30-day CD during the review quarter. This compared to a net placement of $14.9 billion for the previous quarter (see Table 2.15). The Bank continued to offer its 30-day and overnight instruments at 6.25 per cent and 0.25 per cent, respectively, throughout the review quarter (see Monetary Policy and Base Money Management). During the review quarter, the average yield on GOJ global bonds declined to 7.61 per cent from an average of 7.77 per cent during the March 2012 quarter. This downward movement occurred amidst reduced concerns about the GOJ’s ability to finance the Euro-denominated bond which matured in July 2012. Notwithstanding this downward trend in the average yield, there was an uptick in yields toward the close of the review quarter which resulted in an average yield of 7.71 per cent at end-June 2012 relative to 7.50 per cent at end-March 2012. Concurrently, the average spread between the GOJ global bonds and the EMBI+ declined by 15 bps to 2.08 percentage points (pps). However, the average spread between the yields on GOJ global bonds



0.001.002.003.004.005.006.007.00

Perc

enta

ge P

oint

s

Figure 2.11Interest Rate Spread

GOJ Globals vs EMBI and US TreasuriesJanuary 2012-June 2012

GOJ Global - EMBI

GOJ Global - US Treasuries

and those on US treasury bonds of a similar maturity increased by 3 bps to 5.77 pps. These changes in spreads suggested that the risk premium associated with Jamaica’s external debt increased, albeit at a slower pace than that for other emerging markets.


19 Monetary Policy and Financial Markets

-15.0

-5.0

5.0

15.0

25.0

35.0

-10.0

-6.0

-2.0

2.0

6.0

10.0

14.0

Per

cen

t

Per

cen

t

JSE Main Index JSE All JamaicanJSE Select Index JSE Cross Listed IndexJSE Junior Mkt (right axis)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

0.0

100.0

200.0

300.0

400.0

500.0

600.0

J$BN

units

trad

ed (J

$MN

)

volumes traded values traded (right axis)

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

Retu

rn (%

)

Equities 30-day Repo Foreign Exchange

Stock Market All JSE indices recorded declines for the June 2012 quarter despite improved earnings results of some listed companies and continued low domestic interest rates. The declines in the indices were mainly influenced by uncertainty regarding the economic impact of the FY2012/13 budget and the timing of a new borrowing agreement between the Government of Jamaica (GOJ) and the International Monetary Fund (IMF).

For the June 2012 quarter, all four JSE indices fell.5 The JSE Main Index declined by 4.4 per cent to close at 87 389.0 points. This compares to a fall of 4.1 per cent and growth of 2.4 per cent for the March 2012 and June 2011 quarters, respectively (see Figure 2.12). Notably, the sharpest decline of 7.9 per cent was reflected in the JSE Select Index. Furthermore, the JSE Junior Market Index fell by 1.1 per cent which reflected a slower pace of decline relative to the March 2012 quarter. This generalized downturn in equity prices was indicative of the continued weakness in the domestic economy and concerns about the impact of a slowdown in the global economy. Further, there was uncertainty related to the impact on the domestic economy of potential revenue measures in the GOJ FY2012/13 budget. The decline may also have been related to risks associated with the likelihood that a new agreement between the IMF and the GOJ may not materialize as well as the possibility of further declines in the NIR. Of note, the decline in the equities market occurred despite improved earnings of some listed companies and relatively low domestic interest rates.6 Consistent with the marked decline in prices, market activity indicators increased significantly during the June 2012 quarter. Specifically, the volume of stocks traded, value and number of transactions increased by 61.0 per cent, 109.0 per cent and 4.0 per cent, respectively, relative to declines of 42.9 per cent, 57.0 per cent and 17.7 per cent for the March 2012 quarter (see Figure 2.13). In addition, the advance-to-decline ratio was 3:27 which compares to a ratio of 6:25 recorded for the previous quarter. Tourism, Manufacturing, Retail, Other, 5 For the quarter the JSE Main, Select, All Jamaican and Combined indices declined by 4.4 per cent, 7.9 per cent, 6.9 per cent and 4.2 per cent, respectively. In addition the JSE Junior Market Index declined by 1.1 per cent. 6 See Money and Credit and Foreign Exchange Market.

Figure 2.12 Quarterly Growth of the JSE Indices

June 2011 – June 2012

Figure 2.14

Average Monthly Returns from Equities, Foreign Currency and Fixed Income

Investments

Figure 2.13 Quarterly Movements in Volumes & Values Traded

June 2011 – June 2012


20 Monetary Policy and Financial Markets

Table 2.167

Price Qtr. Change Companies ($) (%)Finance

Scotia Investment Limited 23.18 21.2

CommunicationsCable and Wireless 0.16 18.8

ConglomeratesLascelles, deMercado and Company Ltd

270.00 1.9

Advancing Stocks as at end-June 2012

Table 2.17

Price Qtr. ChangeCompanies ($) (%)

ManufacturingCaribbean Cement Company 1.22 -48.7

Desnoes & Geddes 3.80 -25.9

Finance

PanCaribbean Financial Services 22.00 -16.9

Mayberry Investment Limited 2.24 -17.3

Scotia Group Jamaica 20.98 -21.5

Jamaica Money Market Brokers 9.66 -22.1

CommunicationsGleaner Company 1.46 -23.2

TourismCiboney Group 0.02 -50.0

O therPulse Investments 1.98 -19.2RetailCarreras Limited 50.46 -19.9

Declining Stocks as at end-June 2012

7 Table 2.14 and Table 2.15 indicate the three advancing stocks and the ten worst performing stocks during the review quarter, respectively.

Finance and Communications accounted for the top ten declining stocks and recorded respective average price depreciations of 50.0 per cent, 10.7 per cent, 10.3 per cent, 10.3 per cent, 6.9 per cent and 1.5 per cent, respectively, for the review quarter (see Table 2.17).8

8 The three advancing stocks on the JSE Main Index for the review quarter recorded price increases of 21.2 per cent, 18.8 per cent and 1.9 per cent, respectively (see Table 2.14).



.

(*) Volatility is calculated as the standard deviation of the daily logarithmic returns, based on the WASR

Foreign Exchange Market The foreign exchange market was characterized by significant pressures in the June 2012 quarter. This was reflected in an increase in the pace of depreciation of the weighted average selling rate (WASR) of the US dollar vis-à-vis the Jamaica Dollar to 1.57 per cent from 0.80 per cent in the previous quarter (see Figure 2.15). The increased pace of depreciation was principally influenced by an insufficiency of net private capital (NPC) inflows to cover higher net demand for current account transactions. To augment supplies in the market, the Bank sold US$134.9 million (net) during the quarter. This contributed to a decline of US$236.7 million in the net international reserves (NIR) for the quarter to US$1 540.4 million at end-June 2012.

The WASR of the US dollar vis-á-vis the Jamaica Dollar depreciated by 1.57 per cent for the review quarter to J$88.70 = US$1.00 at end-June 2012. This was relative to the depreciation of 0.80 per cent for the March 2012 quarter and the average depreciation of 0.71 per cent for the preceding five June quarters, excluding 2010.1 The movement in the rate for the review quarter reflected depreciations of 0.05 per cent, 0.88 per cent and 0.65 per cent in April, May and June, respectively (see Figure 2.15). For the calendar year to-date, the value of the Jamaica Dollar depreciated by 2.36 per cent vis-à-vis the US dollar relative to a depreciation of 0.06 per cent for the comparable period in 2011. Consistent with the faster pace of depreciation, all measures of foreign exchange market volatility increased for the June 2012 quarter. In particular, the average weekly trading range and the standard deviation of daily returns from holding US dollars increased compared to the preceding quarter (see Figure 2.17). The average bid-ask spread expressed as a percentage of the buying rate also increased, albeit marginally (see Figure 2.18 and Figure 2.16).2

The increased pace of depreciation in the WASR for the June 2012 quarter

primarily reflected an insufficiency of NPC flows to cover higher net demand for

balance of payments (BOP) current account transactions (see Table 2.18). The

Bank estimates that there was an increase of US$53.7 million in the net foreign

Currency demand to satisfy BOP current account transactions relative to the March 2012 quarter. This was largely related to a moderate increase in end-user demand to facilitate payments for imports, particularly in May.

-1.5-1.0-0.50.00.51.01.52.02.53.03.5

Per

ce

nt (

%)

Month

0.0

0.1

0.1

0.2

0.2

0.3

Per

ce

nt (

%)

Month

Figure 2.15 Percentage Change in Weighted Average

Selling Exchange Rate (e.o.p.) (J$1.00= US$)

Figure 2.17 Exchange Rate Volatility (*)

Figure 2.16 Exchange Rate Trading Range

Figure 2.18 Exchange Rate Spread as a

Percentage of the Buying Rate

0.380.400.420.440.460.480.500.520.540.560.58

Per

cen

t (%

)

Quarter



Table 2.18

* BOJ estimates of cash flows within the private domestic economy Table 2.19

Higher spending on imports was associated with an estimated increase in consumer goods imports, which is estimated to have exceeded seasonal trends. In addition, there was a seasonal decline in foreign currency inflows due to lower earnings from tourism. These changes coincided with a decline of 1.0 per cent in the average per diem purchases by the Authorized Dealers to US$28.8 million relative to the previous quarter. Concurrently, average per diem sales declined by 3.7 per cent to US$29.6 million relative to the preceding quarter. Portfolio inflows were constrained throughout the quarter arising from concerns regarding the trajectory of the Bank’s gross reserves as well as the Government’s financing plans for its maturing Euro-denominated bond in July. In addition, there was continued uncertainty about the timing and status of an agreement with the IMF on a medium-term economic programme. Notwithstanding, there was a marginal increase in portfolio flows during the quarter. Market conditions improved towards the end of the quarter due to tight Jamaica Dollar liquidity as well as increased communication with the market by the Ministry of Finance (MOF) and the Bank regarding identified financing for the maturing bond and the adequacy of the reserves.

5.0

10.0

15.0

20.0

25.0

0.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

3500.0

4000.0

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

WE

EK

S

US

$MN

QuarterGross Reserves

Wks of Goods and Services Imports

Foreign Exchange Cash Flows* US$MN

Change Relative to

Previous 2011 2012 2012

Apr –

Jun

Jan –

Mar

Apr –

Jun

Quarter Year

Net Current Inflows -548.1 -403.0 -456.7 -53.7 91.4

Current Inflows 818.4 1 031.4 1 018.9 -12.5 120.5

Current Outflows 1 446.4 1 434.4 1 475.7 41.3 29.3

Net Private Capital Inflows

Balance

768.4 399.2 417.9 18.7 -350.5

220.3 -3.8 -38.8 -35.0 -259.1

Net International Reserves (US$MN)

Month Stock One Month

Change

Jan – 12 1 882.6 -83.5

Feb – 12 1 874.7 -8.0

Mar – 12 1 777.1 -97.5

Apr– 12 1 771.8 -5.3

May – 12 1 718.8 -53.0

June - 12 1 540.4 -178.4

Figure 2.19 Gross Reserves and Weeks of Goods and Services

Imports

Table 3.1

GOODS

Agricultu

Mining &

Manufac

Construc

SERVICES

Electricit

Wholesa

Hotels &

Transpor

Financing

Real Esta

Producer

Other S

Financial

TOTAL G

The pace

2012 quar

-3-2-

23

Per

cent

GDP Growth: T(12-M

1

Sectoral Ju

ure, Forestry & Fishin

& Quarrying

cture

ction

S

y & Water Supply

le & Retail Trade, Re

Restaurants

rt Storage & Commu

g & Insurance Service

ate, Renting & Busine

rs of Government Se

ervices

Intermediation Serv

DP

of economic ac

rter.

30.020.010.00.0

10.020.030.0

3. Rea

Figure 3.1 Tradable vs. Non-TrMonth Per Cent Cha

Contribution tune 2012 Quart

ng

epairs & Installation

nication

es

ess Activities

rvices

vices Indirectly Meas

ctivity remaine

Quarte

Tradable

al Sector

radable Industries ange)

to Growth ter

Esti

Imp

Gr

+

ured

‐/

ed flat in the Ju

er

Non-Trada

Develop

imated

pact on

rowth

+ve

+ve

‐ve

‐ve

‐ve

+ve

+ve

+ve

+ve

‐ve

‐ve

‐ve

+ve

+ve

‐ve

/+ve

une

able

pments

Bank of Ja

23

For the June remained weakthe range of -0per cent in ecreview quartRestaurants, ASupply. HowStorage & CoFrom the persestimated to haggregate spen

Aggregate SupThe pace of ecrange of -0.5 pa marginal decgrowth of 0.9 pace of econbackground ouncertainty abcontraction in economy over conditions werremittance inflcontinued to be

During the revindustries, thecontraction in of the non-tragrowth in Agriand Financingestimated cont

amaica Quarterly M

M

2012 quarterk with real Gro0.5 per cent to conomic activiter, there weAgriculture, Fowever, contracommunication, spective of agghave improved nding were esti

pply conomic activityper cent to 0.5 pcline in the Ma per cent for tnomic growth of continued bout the impa

real wages asr the four precere, however, im

flows to Jamaice sluggish.

view period, thee impact of the tradable indadable industriculture, Foresg & Insurancetractions in Min

Monetary Policy R

Monetary Policy a

r, economic acoss Domestic Pr0.5 per cent. Tty for the Mar

ere estimated orestry & Fishictions were es Construction

gregate demandmoderately wh

imated to have

y is estimated tper cent in the rarch 2012 quarthe four preced

h for the quaweak domesti

act of Governms well as increding quarters.

mpacted positivca. Although i

ere was weak exwhich was p

dustries (see Firies was primastry & Fishing,e Services. Wining & Quarryi

Report, April to Ju

and Financial M

ctivity is estimroduct (GDP) gThis follows a rch 2012 quar

increases ining and Electristimated withiand Mining &

d, Net Externahile the other ccontracted.

to have remainereview quarter. rter but comparding quarters. arter occurred ic demand pament’s FY201

easing unemploThe weak dom

vely by continuimproving, exte

xpansion in thepartially outweigure 3.1). Thearily reflected , Electricity & ithin the tradabing and Transp

une 2012

Markets

mated to have growth within decline of 0.1

rter. For the n Hotels & icity & Water n Transport,

& Quarrying. al Demand is components of

ed weak in the This follows

res to average The reduced against the

artly due to 12/13 budget, oyment in the mestic demand ued growth in ernal demand

e non-tradable eighed by a e performance

in moderate Water Supply ble industries, port, Storage


Real Sector Developments

24

Figure 3.2 Domestic Crop Production (12‐Month Per cent Change)

Sources: Bank of Jamaica, Ministry of Agriculture

Figure 3.3

Total Stop‐over Visitor Arrivals & Visitor Expenditure (12‐Month Per Cent Change)

Source: Jamaica Tourist Board

Figure 3.4 Total Electricity Generation & Water Production

(12-Month Per Cent Change)

Sources: Jamaica Public Service & National Water C Commission

& Communication offset the expansion estimated for Hotels & Restaurants (see Table 3.1). Agriculture, Forestry & Fishing is estimated to have expanded at a slower pace in the June 2012 quarter relative to average quarterly growth of 8.2 per cent for the preceding four quarters. Lower growth in the industry reflected the impact of drought conditions, the emergence of crop disease as well as lower external demand during the review quarter. Preliminary data indicated an expansion of 4.5 per cent in domestic crop production in the review period, below average quarterly expansion of 14.8 per cent in the four preceding quarters (see Figure 3.2). The expansion in domestic crop production reflected a marginal improvement in productivity, measured as tonnes per hectare, to 14.7 in the review quarter from 13.9 in the June 2011 quarter. The estimated contraction in export agriculture reflected declines in citrus, coffee, sugar cane milled and cocoa of 12.6 per cent, 7.4 per cent, 21.2 per cent and 29.8 per cent, respectively. In particular, the contraction in coffee exports was attributed to a fall in demand from Japan relative to the comparable period in 2011 as well as the impact of the berry bora disease. The decline in sugar cane milled reflected the earlier conclusion of the sugar crop relative to the comparable period in 2011. In the context of greater airlifts to the island, Hotels & Restaurants is estimated to have expanded in the review quarter. The estimated expansion in Hotels reflected an increase of 3.9 per cent in stop-over visitor arrivals relative to the corresponding quarter in 2011. The increase in airlifts primarily reflected the resumption of flights from Dallas and Fort Lauderdale by some airlines for the summer months as well as new airlifts from Cincinnati, Nashville and Toronto. Further, there was an increase of 4.4 per cent in visitor expenditure (see Figure 3.3). For Restaurants the estimated growth reflected increased, albeit weak, demand. For the sixth consecutive quarter, Electricity & Water Supply is estimated to have recorded growth, similar to the average expansion of 1.3 per cent for the previous four quarters. The outturn reflected a moderate increase of 1.0 per cent in electricity generation as water production was estimated to have declined. The expansion in electricity generation occurred in the context of greater demand for industrial electricity. With respect to the reduction in water production, this

-40.0-30.0-20.0-10.0

0.010.020.030.040.0

Per

cent

Quarter

-6.0-4.0-2.00.02.04.06.08.0

10.012.014.016.0

Per

cent

Quarter

Stop Over Visitor ArrivalsVisitor Expenditure

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

Per

cent

Quarter

Gross Electricity GenerationWater Production



25

Figure 3.5 Trends in Alumina &Total Bauxite Production

(12‐Month Per Cent Change)

Source: Jamaica Bauxite Institute

Figure 3.6 Total Domestic Cargo Movements and Cruise passenger arrivals


Source: Port Authority of Jamaica

reflected a normalization, relative to a significant increase of 10.0 per cent in the corresponding period a year earlier as well as drought conditions during the review period (see Figure 3.4). Mining & Quarrying is estimated to have contracted in the review period for a second consecutive quarter. This decline was attributed to lower capacity utilization in the alumina and bauxite industries of 39.7 per cent and 92.5 per cent, respectively, relative to 42.0 per cent and 96.6 per cent in the June 2011 quarter. Lower capacity utilization in both industries was attributed to disruptions in production due to electrical and mechanical difficulties. In this context, total bauxite and alumina production declined by 2.3 per cent and 3.3 per cent, respectively, for the review quarter (see Figure 3.5). Transport, Storage & Communication is estimated to have declined in the review quarter. The industry’s performance primarily reflected a contraction in Transport, due to declines in both water and air transportation, which was partly offset by a marginal growth in Communication. The fallout in water transportation was partly attributed to a decrease of 0.5 per cent in domestic cargo movement, resulting from an estimated fall in demand for imports when compared to the June 2011 quarter (see Figure 3.6). With regard to the estimated decline in air transportation, this reflected the impact of the formal acquisition of Air Jamaica by a foreign entity in the September 2011 quarter. For the review quarter, a decline is estimated within Manufacture compared to average quarterly growth of 1.9 per cent for the four preceding quarters. The performance of the industry reflected an estimated contraction for both Food & Beverages and Other Manufacturing. Within Food & Beverages, the lower output stemmed primarily from alcoholic beverages and sugar & molasses. The reduction in alcoholic beverage production is partly attributed to reduced output from one of the major companies which shifted production from Jamaica to the USA. The decline in Other Manufacturing mainly reflected reduction in petrol refining during the review quarter due to maintenance activities.9

9 During the maintenance period petrol refining activities are usually curtailed and refined petrol is imported.

-80.0-60.0-40.0-20.0

0.020.040.060.0

Per

cent

Quarter

AluminaTB

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

Per

cent

(C

ruis

e Pa

ssen

ger

Arr

ival

s)

Per

cent

(C

argo

Mov

emen

t)

Quarter

Domestic Cargo MovementsCriuse passenger arrivals



26

Figure 3.7 Trends in Exports and Imports of Goods and Services

-100

-50

0

50

100

150

200

Jun-

08

Sep

-08

Dec

-08

Mar

-09

Jun-

09

Sep

-09

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

(J$

Bn)

Quarter

Imports Exports Net Exports

Source: BOJ & STATIN

For the second consecutive quarter, Finance & Insurance Services is estimated to have expanded. Growth is estimated to have been in line with the marginal increase of 0.6 per cent in the preceding quarter. The improvement in the industry continued to reflect growth in income from service charges, fees and commissions as well as foreign exchange earnings. In addition, the rate of decline in net interest income slowed. Aggregate Demand For the June 2012 quarter, there was a marginal improvement in Net External Demand when compared to the June 2011 quarter, representing the second consecutive quarterly increase. However, Final Consumption and Gross Capital Formation were estimated to have declined. The improvement in Net External Demand was attributed to an estimated increase of 5.2 per cent in the export of goods and services as well as a reduction of 5.3 per cent in the demand for import of goods and services (see Figure 3.7 ). The expansion in exports primarily reflected growth in sugar, ethanol and rum of 20.0 per cent, 62.6 per cent and 5.4 per cent, respectively, relative to the comparable period in 2011. The improvement in sugar reflected changes in contractual arrangements which saw producers taking advantage of more favourable market conditions, while growth in the export of ethanol reflected an increase in market demand. Expansion in rum exports reflected an increase in the range of products offered in the external market by local producers. The estimated contraction in imports was attributed to decreases of 3.3 per cent, 0.2 per cent and 3.6 per cent in capital goods, raw materials and fuel, respectively. The general performance of imports during the review period was attributed to lower investment activities stemming from the weak economy as well as the postponement of roadwork projects under the Jamaica Development Infrastructure Programme. The estimated contraction in Final Consumption Expenditure during the review quarter reflected a moderate decline in Private Consumption, partly offset by a moderate increase in Government Consumption. Specifically, the estimated marginal reduction in Private Consumption

occurred against the background of lower disposable income stemming partly

from the rising trend in unemployment and decline in real wages which

continued to suppress demand for goods and services. There was



27

Figure 3.8 Central Government Wages & Salaries

(12-Month Per Cent Change)

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Per c

ent

Quarter

Wages & Salaries

Source: Ministry of Finance & Planning

Figure 3.9 Business Conditions Survey (12-Month Per Cent Change)

-100.0

-50.0

0.0

50.0

100.0

150.0

200.0

Jun-

08

Sep

-08

Dec

-08

Mar

-09

Jun-

09

Sep

-09

Dec

-09

Mar

-10

Jun-

10

Sep

-10

10-D

ec

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Per

cent

QuarterPresent Business ConditionsExpected Business Conditions

Source: BOJ

Figure 3.10 Capital Goods Imports and Capital Expenditure (Central Govt)


-100.0

-80.0

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Per

cent

Quarter

Capital Goods Imports Capital Expenditure (Central Govt)

Sources: Ministry of Finance & Planning, STATIN and BOJ

an increase of 1.6 percentage points in the unemployment rate since the start of the year relative to the outturn for 2011, reflecting both a fall in employment as well as an increase in the labour force. The decline in employment was greatest in the industries that were among the largest contributors to the island’s labour force. Similarly, since the start of 2012, real wages have fallen by 3.6 per cent relative to the average level that prevailed in 2011 which contributed to a reduction in spending within the economy. Of note, total imports (c.i.f.), an indicator of private spending, declined by 9.0 per cent during the review quarter. Although remittance inflows were stronger than that for the corresponding period in 2011, the growth was not sufficient to bolster consumer spending. Moderate growth in Government Consumption was inferred from an estimated increase of 11.8 per cent in expenditure for wages and salaries. This was mainly attributed to the payment of retroactive salaries to public sector workers (see Figure 3.8). There was an estimated slower pace of decline in Gross Capital Formation in the review quarter relative to that observed in the prior quarter. The continued decline in investment spending was reflected in lower levels of private and public investments. The performance of private investment was a reflection of the uncertainty surrounding the impact of the Government’s upcoming FY2012/13 budget. This uncertainty was reflected in the Bank’s survey of business expectations for the June 2012 quarter where the index for present business conditions deteriorated by 4.0 per cent relative to an increase of 47.3 per cent in the corresponding quarter in 2011 (see Figure 3.9). In addition, the index for future business conditions declined by 4.0 per cent during the review period relative to the June 2011 quarter. Contraction in private investment spending was inferred from an estimated decline of 3.3 per cent in capital goods imports relative to the corresponding quarter of 2011 (see Figure 3.10). The estimated reduction in public investment was deduced from a 1.7 per cent decline in Government capital expenditure relative the June 2011 quarter.


Inflation 28

Figure 4.1 Quarterly Inflation Rate

0.00.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Jun-11 Sep-11 Dec-11 Mar-12 Jun-12

%Actual

5-yr Average

Source: STATIN

Figure 4.2 Inflation (Annual & Quarterly Point-to-Point Rates)

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

0

5

10

15

20

25

30Quarterly (%)12 month (%)

Annual % PTP Quarter % PTP

Source: STATIN

Figure 4.3 Geographical Distribution of Inflation and Share

1.81

1.43

1.23

0.84

0.44

0.19

GKMA OUC RUA

Qtr-Inflation (%) Qtr-Share (% pts)

Source: STATIN & BOJ

Headline inflation was 1.5 per cent for the June 2012 quarter. This outturn was marginally lower than that for the March 2012 quarter as well as the five-year average for June quarters. During the review period, inflation emanated primarily from the partial effect of tax measures announced in the Government’s FY2012/13 budget presentation as well as seasonal shortages for several agriculture items. The outturn was however tempered by the impact of declining international oil prices on the cost of electricity and automotive fuel. There were also countervailing effects from a lowering of the General Consumption Tax (GCT) in June 2012.

Trends in Headline Price Indices Inflation, as measured by changes in the All Jamaica Consumer Price Index (CPI), was 1.5 per cent for the June 2012 quarter (see Figure 4.1 and Figure 4.2). This was lower than the 2.0 per cent recorded in the June 2011 quarter and the 5-year average for June quarters of 2.9 per cent (see Figure 4.1). During the review period, inflation rates of 0.4 per cent, 0.5 per cent and 0.6 per cent were recorded in April, May and June 2012, respectively. The inflation outturn emerged at the bottom end of the forecast range announced in the March 2012 Quarterly Monetary Policy Report. Subsequent to the publication of that report, the BOJ had adjusted the forecast range for the June 2012 quarter given the announced tax measure in May 2012. However, timing issues meant that only a part of the effect was felt in June 2012. Additionally, significant reductions in oil prices, which were unanticipated, resulted in a lower than expected outturn. Underlying Inflation The quarterly change for the three core measures, CPI without Food & Fuel (CPI-FF), CPI without Agriculture & Fuel (CPI-AF) and the Trimmed Mean (TRIM) were 1.1 per cent, 1.9 per cent and 1.0 per cent, respectively. There was a moderate increase and decrease in the CPI-AF and CPI-FF, respectively, when compared with the March 2012 quarter outturn. The

44.. IInnffllaattiioonn


Inflation 29

Figure 4.4 Annual Trends in Core Inflation

0

2

4

6

8

10

12

14 12-month (%)

CPI-AF

CPI-FF

TRIM

Figure 4.5 Inflation by Division

2.98

1.22

2.36

1.16

1.98

0.98

0.16

0.00

2.19

0.35

1.03

0.84

FNB

ATB

CF

HWEG

FHERM

HLTH

TRAN

COM

R&C

ED

R&H

MIS

80.42

1.21

5.68

10.72

7.04

2.32

1.50

0.00

5.30

0.54

4.61

5.09

Actual Share x 100

Blue bars = positive, Red bars = negative

MIS= Miscellaneous Goods & Services, R&H=Restaurants & Hotels,

ED=Education, R&C=Recreation & Culture, COM=Communication, TRAN=

Transport, HLTH=Health, FHERM=Furniture, Household Equipment &

Routine Household Maintenance, HWEG=Housing, Water, Electricity, Gas &

Other Fuels, C&F=Clothing & Footwear, ABT=Alcohol, Beverages &

Tobacco, FNB=Food & Non-Alcoholic Beverages

Source: STATIN

TRIM outturn when compared to March 2012 was however, unchanged. All 12-month point-to-point core measures except for the CPI-AF, reflected a marginal decline when compared to the March 2012 quarter (see Figure 4.4 and Appendix). These core outturns reflected generally stable underlying inflation during the quarter. At end-June 2012, the 12-month CPI-FF, CPI-AF and TRIM were 5.4 per cent, 6.9 per cent and 4.2 per cent, respectively and were all marginally higher than the corresponding measure at end-June 2011. Regional Inflation Inflation was highest in Greater Kingston & Metropolitan Area (GKMA), during the review quarter, with Other Urban Centers (OUC) representing the next largest contributing region (see Figure 4.3). The higher inflation in GKMA was primarily due to generally higher prices for agriculture items in that region. Main Factors During the June 2012 quarter, inflation primarily reflected the impact of some tax measures announced during the FY2012/13 budget presentation. Inflation also stemmed from seasonal shortages of some agriculture items. However, there were countervailing pressures during the review quarter due to the impact of a decline in the import price index, reflecting a reduction in imported prices, a lowering of the General Consumption Tax (GCT) rate as well as weak domestic demand. Despite an increased pace of depreciation in the quarter, there was no evidence of any noticeable pass-through to inflation in the review quarter. Administrative Price Adjustments During June 2012, tax measures were implemented to widen the tax base, incorporating a variety of basic food items that were previously tax-exempt or zero rated.10 In addition, there were increased fees for motor vehicle license, fitness and registration. Due to the timing of announcements, the full effect of these tax measures was not entirely captured in the June 2012 quarter. The resulting tax effect was mainly reflected in Food & Non- 10 These items were represented in Ministry Papers (32 & 37) which were tabled by the Minister of Finance on 24 May 2012 and 6 June 2012 respectively.


Inflation 30

Figure 4.6 Import Value (monthly c.i.f)

0

50

100

150

200

250

300

350US$Million

Real Import Value

Polynomial Trend

Source: STATIN

Figure 4.7 Quarterly Change EGOF Index and WTI

-80

-60

-40

-20

0

20

40

60

80

100

-80

-60

-40

-20

0

20

40

60

80

100Fuel Index (%

Qtr)WTI (% Qtr

Chg)

WTIFuel

Source: STATIN, Bloomberg

Figure 4.8 Monthly End of Period Exchange Rate (JMD per USD)

85.085.586.086.587.087.588.088.589.089.5

J$ per US$

EOP ExRate

Average

alcoholic Beverages (FNB) and Recreation & Culture (see Figure 4.5). Price increases were highest for Milk, Cheese & Eggs, Fish & Seafood and Meats. The impact of these impulses was tempered by a reduction in the GCT rate to 16.5 per cent from 17.5 per cent.

International Commodity Prices During the June 2012 quarter, BOJ’s import price index fell by 3.7 per cent, following an increase of 4.5 per cent for the March 2012 quarter. This reflected lower prices for crude oil and some imported raw materials.

The price of crude oil, as measured by the benchmark West Texas Intermediate (WTI), declined by 9.2 per cent for the June 2012 quarter, following a 9.4 per cent increase for the March 2012 quarter (see Figure 4.7 and International Developments). This decline resulted in lower electricity and automotive fuel costs for the review quarter (see Figure 4.5). As a consequence, Housing, Water, Electricity, Gas and Other Fuels (HWEG) and Transport moderated to -2.3 per cent and -0.6 per cent relative to 1.4 per cent and -0.2 per cent, respectively, in the March 2012 quarter. The Bank’s grains price index increased by 2.3 per cent for the June 2012 quarter, following a 3.6 per cent decline for the March 2012 quarter. The moderate increase in grain prices for the review quarter reflected a significant rise in the price of rice which was partly offset by moderate declines in the prices of corn and wheat (see International Developments).11 These price adjustments had mixed effects on the prices of domestic manufactured food items. Exchange Rates The value of the Jamaica Dollar vis-à-vis its United States dollar counterpart depreciated by 1.6 per cent over the June 2012 quarter to J$88.70: US$1.00. This followed a 0.8 per cent depreciation in the March 2012 quarter. The increased rate of

11 The index of grains prices monitored by the BOJ is a composite of the prices of rice, wheat and corn.


Inflation 31

Figure 4.9 Monthly Real Debit and Credit Card Transactions Value

80

100

120

140

160

180

200

220

240

Nov

-08

Feb-

09

May

-…

Aug

-09

Nov

-09

Feb-

10

May

-…

Aug

-10

Nov

-10

Feb-

11

May

-…

Aug

-11

Nov

-11

Feb-

12

May

-…

J$million

Real Debit & Credit Card TransactionValue

Source: JETS

Figure 4.10 Monthly Real Consumer Loans

450

500

550

600

650

700

Aug

-08

Nov

-08

Feb-

09

May

-09

Aug

-09

Nov

-09

Feb-

10

May

-10

Aug

-10

Nov

-10

Feb-

11

May

-11

Aug

-11

Nov

-11

Feb-

12

May

-12

J$million

Real Non-BusinessLoans

Figure 4.11 Monthly Real PAYE Contribution

15

20

25

30

35

40

45

50

55

Sep

-06

Jan-

07

May

-07

Sep

-07

Jan-

08

May

-08

Sep

-08

Jan-

09

May

-09

Sep

-09

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Jan-

12

May

-12

J$million deflated

Real PAYE

Polynomial Trend

Source: GOJ

Figure 4.12 Monthly Industrial Electricity Sales – Productivity Indicator

140145150155160165170175180185190

Sep

-08

Dec

-08

Mar

-09

Jun-

09

Sep

-09

Dec

-09

Mar

-10

Jun-

10

Sep

-10

Dec

-10

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

billion MwH

Industrial Electricity Sales

12-mth Average

Source: JPSCo.

depreciation was in the context of uncertainty surrounding the commencement of a new borrowing programme with the IMF and the potential impact of the FY2012/13 budget (see Figure 4.8 and Foreign Exchange Market). Despite the increased pace of depreciation over the review quarter, there was no indication of significant pass-through to inflation. Demand Conditions Indicators of consumer demand for the June 2012 quarter reflected a general deterioration relative to a modest improvement for the March 2012 quarter. The indicators also suggest that demand conditions remained generally weak relative to the three-year period up to the close of FY2008/09 which marked the escalation of a global financial crisis. The weakening of domestic demand was indicated by declines in the real values of PAYE tax receipts, imports as well as debit and credit card transactions, relative to the previous quarter. In contrast, the real value of consumer loans increased modestly (see Figures 4.9 to 4.11).12 Also indicative of the general decline in demand was the decline in real output in the March quarter and the rise in unemployment in the review quarter (see Real Sector Developments ). The low demand condition had a moderating impact on inflation during the review quarter. Supply Conditions During the June 2012 quarter, starchy food supplies reflected declines which contributed to higher food prices. Vegetable supplies, however, recorded a mixture of price increases and decreases that were moderate. This resulted in relatively stable vegetable prices during the review quarter. The annual average industrial electricity sales, used as an indicator of productive activity for manufacturers, hoteliers and distributive traders, reflected a marginal decline of 0.5 per cent for the June 2012 quarter relative to the March 2012 quarter (see Figure 4.12).

12 Demand indicators for the June 2012 quarter were observed over the 3-months to May 2012 relative to the 3-months ending February 2012.


Inflation 32

Summary Inflation in the June 2012 quarter was a modest 1.5 per cent which primarily reflected the fractional impact of recent tax measures. During the quarter, shortages of agriculture supplies as well as seasonal and administrative price increases also contributed to the quarter’s inflation. Price increases were, however, moderated by the impact of declining energy costs combined with a lower GCT rate and a general weakening in demand conditions.


33

Box 1: The Importance of Managing Inflation Expectations. Introduction The principal aim of monetary policy is to maintain a low and stable level of inflation. This may be attained through the implementation of various policy measures to influence the behaviour of economic agents and consequently the trends in inflation. A significant determinant of the behaviour of economic agents is their expectations about present and future economic activities as well as variables such as inflation. This is in a context where their expectation has a significant impact on actual inflation. As such, the monitoring and management of expectations is an important exercise in the formulation of monetary policy by central banks. Bank of Jamaica is currently undertaking initial steps towards adopting an inflation targeting regime to strengthen the policy mechanism for attaining low levels of inflation.13 One of the steps taken was the establishment of a regular survey of business expectations in the economy. This survey is undertaken by the Statistical Institute of Jamaica (STATIN) on behalf of the Bank to ascertain the expectations about inflation and variables which are likely to have an impact on inflation in the near-term. The survey captures the perceptions of senior managers of firms from a number of sectors.14This box will look at the importance of managing expectations, in particular that of inflation, the trend from the Bank’s surveys relative to the actual measured variable and possible factors influencing changes in expectations over time.

13 Inflation targeting (IT) is a policy framework in which a central bank estimates and makes public, a target inflation rate in an effort to steer actual inflation towards that target through the use of interest rate changes and other monetary tools. For more on IT , please see Box: An Inflation Targeting Framework for Jamaica’ in the BOJ Quarterly Monetary Policy Report, October to December 2010 , Vol. 11 No. 3 on the Bank’s website at www.boj.org.jm . 14 The sectors included in the surveys are Manufacturing, Wholesale & Retail Trade, Hotels & Restaurants, Financing, Transport, Storage & Communications, Community, Social & Personal Services, Mining and Construction.

The importance of managing expectations The surveying of the public (in this case, business owners and managers) about the economy is important as it provides their perceptions on the paths of key economic variables such as inflation, wages and the exchange rate. Additionally, respondents are surveyed on their views of present and future business conditions, spending plans and output growth. This information provides the Bank with an understanding of business expectations which enhances its ability to forecast changes in the Jamaican economy. Data collected in these surveys are analysed against the background of existing economic developments and transformed into indices which are then incorporated into empirical models. Further, identifying the changes in inflation expectations over time and across agents, assists in the formulation of monetary policy and serve as a measure of the effectiveness of the Bank’s policy. Indicators of inflation expectations of the public can also act as a direct measure of the Bank’s credibility. All central banks aim to keep medium or long-term expectations at a stable level which is close to its inflation target. In other words, central banks must anchor expectations of inflation in the economy so that it does not change in the face of what may be deemed to be temporary shocks. For example, if in the face of a period of higher than expected inflation, there is little or no change in the public’s long-run expectations, then expectations are said to be well anchored. If, on the other hand, the public incorporates a short period of higher-than-expected inflation by increasing their long-run expectations considerably, then expectations are poorly anchored. In an environment where inflation expectations are well-anchored on the central bank’s target, the credibility of the central bank is normally high. This allows for policy trade-offs which becomes less costly, especially when supply shocks are frequent. For example, a central bank

faceraisageabil RecTheredyeatarglargbee(seeinflalmexpThiBOfor survmea Fig

Theinfl

15 Twasann

ed with rising ise interest ratesents will not ality to attain its

cent trends in ee results from

duction in businars with currentget. In additiogely trended sien convergencee Figure 1 ). Ilation for calen

most 90.0 per cpecting that the is compares to

OJ’s projection FY2012/13.15

vey was conduasures.

ure 1: Trends in

e downward luenced by the

The Bank’s origis revised conseqnounced in the FY

inflation from as, which is inimadjust their ex medium and lo

expectations the Bank’s su

nesses’ inflationt expectations lon, businessesimilarly to the e in both for thIn particular, o

ndar year 2012 cent of the resoutturn will be

o the outturn oof a range of 1However, it s

ucted prior to

n Expectation fo

trend in expe low outturn

inal target range

quent to the annoY2012/13 budge

a supply shock wmical to growthxpectations aboong term inflati

urvey have shn expectations argely in line w’ inflation expactual outturn

he past three suon average, busto be about 8.0pondents in th

e in single digitsof 6.0 per cent10.0 per cent toshould be notethe announcem

or Calendar Yea

pectations couin 2011, the

of 6.0 per cent t

ouncement of theet.

will not have toh, as economicout the bank’sion targets.

hown a generalover the past 4

with the Bank’spectations haven and there hasurveys in 2012sinesses expect0 per cent with

he latest surveys (see Table 1)t for 2011 ando 12.0 per cented that the lastment of the tax

ar Inflation

ld have beenattainment of

to 8.0 per cent e tax measures

B

SURVDAT

Average

Survey r

0.0 - 4.9

5.0 - 9.9

10.0 - 1

15.0 - 1

20.0 - 2

Over 25

o c s

l 4 s e s 2 t h y .

d t t x

n f

annoufinanfor thpart b Trendreflecthe B TableInflat

Figurand t

Simila susmontUS dhave

Bank of Jamaica Q

VEY ES

Feb12/ Mar12

Mar12/ Apr12

e 7.9 8.3

responses (percentage of to

9 2.8 3.2

9 84.5 76.3

4.9 12.7 20.1

9.9 0.0 0.4

24.9 0.0 0.0

5 0.0 0.0

OVERALL

unced targets foncial markets. Hhe current year by greater depre

ds in expectedcted a significa

Bank’s projectio

e 1: Trends i ntion

re 2: Expected the Bank’s Fore

lar to the trend stained decline th ahead deprecdollar. It is im

fallen to belo

Quarterly Monetary

Apr12/ May12

Feb12/ Mar12

MarAp

8.1 8.1 7.

otal)

1.1 3.7 7

86.9 79.6 77

11.0 16.7 15

1.1 0.0 0

0.0 0.0 0

0.0 0.0 0

FIN SEL

for FY2011/12 aHowever, the hrelative to last eciation trends.

d inflation 12ant downturn anon.

n Expectation

Inflation 12 moecast

d in inflation exin respondents

ciation of the Jamportant to noow 2.0 per cen

y Policy Report, A

r12/ r12

Apr12/ May12

Feb12/ Mar12

.8 8.0 7.9

.5 2.2 0.0

7.4 87.0 91.4

5.1 8.7 8.6

.0 2.2 0.0

.0 0.0 0.0

.0 0.0 0.0

ECTORWholesal

Re

and greater stabhigher inflation year may be in.

-month ahead nd is basically i

for Calendar

onths Ahead ve

xpectations, thers’ expectationsamaica Dollar vote that expectant depreciation

April to June 2012

34

Mar12/ Apr12

Apr12/ May12

8.8 8.6

1.9 1.7

70.4 76.3

25.9 20.3

1.9 1.7

0.0 0.0

0.0 0.0

le & Retail, Hotels, estaurants

bility in the anticipated

nfluenced in

have also in line with

Year 2012

ersus Actual

re has been of the 12-

vis-á-vis the ation levels per annum

Surve

Signifi

Margin

Remai

Margin

Signifi

Don’t K

ovecenthe expunccon Figu

RegrevmarHowmarwoufinasurvfinahig Tab

SURVEY DATES

Nov11/Dec11

ey responses (percentag

cantly Lower 0.0

nally Lower 18.6

in the Same 56.4

nally Higher 22.6

cantly Higher 0.3

Know 1.7

er the past twont in the March

last two supectations of decertainty surrouncerns about the

ure 3: One-Year A

garding the Bvealed that mosrket interest rwever, over rginally higheruld be marginaancial sector revey. Howeverancial sector wher than that fo

ble 2: Three Mont

/ Feb12/ Mar12

Mar12/ Apr12

AM

e of total)

0.3 0.0

18.1 15.7 1

52.1 49.3 4

23.6 28.6 2

2.8 3.2

3.1 2.5

OVERALL

o years comparh 2009 survey urveys there epreciation. Thiunding Jamaicae level of the re

Ahead Expected

Bank’s policy st respondents rate will remaithat period, t

r rate increasedally lower, deceflected a similr, for the final who are expector the overall sa

ths Ahead Expect

Apr12/ May12

Nov11/ Dec11

Feb12/ Mar12

1.0 0.0 0.0

13.8 11.9 16.7

49.7 59.5 55.6

29.7 26.2 24.1

3.4 0.0 1.9

2.4 2.4 1.9

FIN S

red to expectati(see Figure 3)was a margiis could be reflea’s economic peserves.

Depreciation

rate, the pastbelieve that thin the same (the proportiond while those wcreased. The alar trend to thasurvey, respon

ting a marginaample.

tation of BOJ Pol

Mar12/ Apr12

Apr12/ May12

0.0 0.0

11.3 14.9

52.8 46.8

30.2 34.0

0.0 2.1

4.8 2.1

SECTOR

ions of 8.0 per). However, ininal uptick inective of recentprogramme and

t four surveyshe 30-day open(see Table 2)n expecting awho thought itanalysis for thet of the overall

ndents from theal increase was

licy Rate

B

r n n t d

s n . a t e l e s

With rate, expecouttustabilconfithe JStand In parate fto apremaThis steadBill rconst FigurBill R

The thave increexpecfinanimproSince

Bank of Jamaica Q

h respect to expthere has be

cted rate whichurn (see Figurelity in financidence subsequJamaica Debt d-By Arrangem

articular, expecfell sharply from

pproximately 7.ained at that lev

expected ratedy gap betweenrate. This has tant BOJ policy

e 4: Three MontRate and Actual R

trends in both pshown a decl

ase starting inctations were

ncial crisis anovement in 20e then the trend

Quarterly Monetary

ectations for theen a significah was generalle 4). This trenial markets a

uent to the succExchange and

ment (SBA) in 2

ctations for them above 20.0 p5 per cent as a

vel despite the ae since Septemn expectation a

occurred in thy rate.

ths Ahead Expe cRate

present and futline since mid

n mid-2009. Tlargely affect

nd the event010 with the sds have practica

y Policy Report, A

he six-month Trant trend declly in line withnd decline is reand the improcessful implem

d the signing o2010.

e six-month Trper cent as at Mat September 20actual rate trendmber 2010, reand the 6-monthe context of a

ctation of 6-Mon

ture business ed-2007 with a This pattern revted by the ontual recession,signing of the ally plateaued a

April to June 2012

35

reasury Bill line in the h the actual eflective of

ovement in mentation of

of an IMF

reasury Bill March 2009 010 but has ding lower. epresents a th Treasury a relatively

nth Treasury

xpectations subsequent vealed that

nset of the , with an IMF-SBA.

and may be

reflcou Figu

SumInflimpbacaboinvinflconadoinflpolof m Forbusintehavas wandsurvinfo

lecting the ununtry’s economi

ure 5: Expectatio

mmary flation expectatiplementation ockground that out inflation investment decisiluence actual inntext, a numberopted an inflatilation expectatilicy decision-mmonetary policy

r Jamaica, the ssinesses’ expecerest rates. Theve been influenwell as measur

d debt sustainabvey data, the Bormation as it

ncertainty surric programme (

n of Present and

ions play a signof monetary p

consumers’ anfluence their ions which, innflation and no

r of central bankion targeting fion surveys as

making process ay.

surveys have retations of inflase improvemenced by the attares aimed at imbility in 2010.

Bank will continaims to lower

rounding the (see Figure 5).

Future Business

nificant role in policy. This and businesses

respective conn turn, directlyominal interestks, particularly framework, usea key input in and to evaluate

evealed noticeaation, depreciatints in businesseinment of the improving the c Given the us

nue to collect anr inflation to t

future of the

Conditions

the design andis against the

s’ expectationsnsumption andy or indirectlyt rates. In thisthose that have

e the results oftheir monetary

e the credibility

able declines inion and market

es’ expectationsinflation targetscountry’s fiscalsefulness of thend monitor thisthe level of its

B

e

d e s d y s e f y y

n t s s l e s s

tradinenvirdevel

Bank of Jamaica Q

ng partners, enronment whiclopment.

Quarterly Monetary

nhance credibich is condu

y Policy Report, A

ility and creatucive to gro

April to June 2012

36

te a stable owth and


Economic Outlook and Monetary Policy Perspectives

Table 5.1

Jamaica: Selected

Economic Indicators

Outturn

for

FY2011/12

Projections

for Sep’ 12

Quarter

Projections

for

FY2012/13

Inflation

(% change)

7.3 1.0 to 2.0 10.0 to

12.0

Net

International

Reserves

1 777.2 1 323.1 1 667.0

Gross

Reserves

(US$MN

e.o.p.)

2 639.0 2 167.8 2 511.7

Weeks of

Imports of

Goods and

Services

17.3 13.7 15.9

GDP

(% change)

0.9 -0.5 to 0.5 -0.5 to 0.5

Inflation and output growth should be largely similar to

the results of the previous quarter.

The global economic environment continued to be affected by Europe’s fiscal challenges which had a negative impact on output and investment prospects. International commodity prices declined in the June quarter as a result of a pessimistic outlook for the global economy, but could increase for the remainder of the fiscal year as a result of the adverse impact of escalating geopolitical tensions and unfavourable weather conditions. In the domestic economy, the fiscal measures announced by the Government of Jamaica (GOJ) in its FY2012/13 budget should cause some inflationary impulse while constraining domestic demand. However, significant reductions announced for communication and energy rates should counter some of the upward pressure on inflation in the quarter. In the context of these factors, domestic inflation is forecasted to be in the range of 1.0 per cent to 2.0 per cent for the September 2012 quarter. This projection is also underpinned by an increase in inflation expectations while there should be no inflationary pressures from domestic capacity conditions. Jamaica’s output is forecasted to remain relatively flat in the range of negative 0.5 per cent to 0.5 per cent for the September 2012 quarter. Growth is expected primarily from Agriculture, Forestry & Fishing, Electricity & Water Supply and Hotels & Restaurants. For FY2012/13, BOJ projects that domestic output will grow in the range of -0.5 per cent to 0.5 per cent and inflation should be in the range of 10.0 per cent to 12.0 per cent. In this context, the Bank will continue to conduct monetary policy that is consistent with the maintenance of a stable macroeconomic environment.

Outlook - September 2012 Quarter Inflation Headline inflation, as measured by the change in the consumer price index (CPI), is forecasted to be in the range of 1.0 per cent to 2.0 per cent for the September 2012 quarter.16 This would represent a similar outturn to that for the June 2012 quarter

16 The 5-year average inflation rate for a September quarter, excluding the September 2008 quarter, was 2.4 per cent. September 2008 was excluded given that quarter’s unusually high

5. EEccoonnoommiicc OOuuttllooookk aanndd MMoonneettaarryy PPoolliiccyy PPeerrssppeeccttiivveess


Economic Outlook and Monetary Policy Perspectives 38

Figure 5.1 Trends in Changes in Exchange Rate and Headline

Inflation

Figure 5.2A Projected Trends in Average Wheat Prices

Figure 5.2B Projected Trends in Corn Prices

inflation, resulting from a spike in international oil prices and the global financial crisis at that time.

reflecting the continued impact on prices of the tax measures announced by the GOJ for the FY2012/13 budget, the impact of which should be moderated by significant declines in communication and energy rates. The projected inflation for the quarter also incorporates an expected increase in imported prices and inflation expectations while there should be no inflationary pressures from domestic capacity conditions. Fiscal Measures The GOJ announced a raft of fiscal measures in its budget presentation for FY2012/13 to take effect in the June and September 2012 quarters. These measures included (i) a widening of the tax base, (ii) an increase in the Common External Tariff on selected imported goods, (iii) an increase in license and registration fees for motor vehicles and (iv) a reduction in the General Consumption Tax. The measures are expected to have an impact on prices, albeit temporary, in the September 2012 quarter. The impact of these measures, however, could be tempered by the present weak demand conditions. Imported Inflation Imported prices, as measured by the Bank of Jamaica’s import price index, are projected to increase in the September 2012 quarter, resulting in some upward impulses to domestic prices. The increases are expected to be higher than the average expansion of 0.2 per cent recorded in the five previous September quarters.17 The projection for higher imported prices is underpinned by increased concerns surrounding supplies of grains in the context of recent drought conditions in major producing countries, particularly the USA. These supply constraints are expected to result in higher prices for agriculture commodities. In particular, corn, wheat and soybean prices are expected to increase by 34.6 per cent, 33.2 per cent and 10.4 per cent, respectively (see Figures 5.2A and 5.2B). However, most of the impact is anticipated in the second half of the fiscal year.

17 The imported inflation in the September 2008 quarter also was excluded due to that quarter’s unusual inflation due to the spike in oil prices and the global financial crisis at that time.

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

exchange rate CPI

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

500.0

Jan‐08

Mar‐08

May‐08

Jul‐08

Sep‐08

Nov‐08

Jan‐09

Mar‐09

May‐09

Jul‐09

Sep‐09

Nov‐09

Jan‐10

Mar‐10

May‐10

Jul‐10

Sep‐10

Nov‐10

Jan‐11

Mar‐11

May‐11

Jul‐11

Sep‐11

Nov‐11

Jan‐12

Mar‐12

May‐12

Jul‐12

Sep‐12

Nov‐12

Jan‐13

Mar‐13

US$/mt

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

500.00Dec‐0

7Mar‐0

8Jun‐08

Sep‐08

Dec‐0

8Mar‐0

9Jun‐09

Sep‐09

Dec‐0

9Mar‐1

0Jun‐10

Sep‐10

Dec‐1

0Mar‐1

1Jun‐11

Sep‐11

Dec‐1

1Mar‐1

2Jun‐12

Sep‐12

Dec‐1

2Mar‐1

3

US$/mt



100.0

41.1

96.9

112.8

60.7

44.8 45.5

47.5

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Dec

-05

Jun-

06S

ep-0

6D

ec-0

6Ju

n-07

Sep

-07

Dec

-07

Mar

-08

Jun-

08S

ep-0

8D

ec-0

8M

ar-0

9Ju

l-09

Sep

-09

Dec

-09

Mar

-10

Jun-

10S

ep-1

0D

ec-1

0M

ar-1

1Ju

n-11

Sep

-11

Dec

-11

Mar

-12

Apr

-12

May

-12

Jun-

12

-0.06

-0.04

-0.02

0

0.02

0.04

0.06

0.08

CPI(%chg) Output gap

Figure 5.3 Trends in Domestic Headline Inflation and the Output

Gap (% change)

Figure 5.4 Index of Inflation Expectations of Businesses

Significant reductions in expected communication and energy rates

Crude oil prices are also expected to increase, albeit marginally, in the September quarter reflecting the impact of the implementation of a European Union ban on crude oil imports from Iran. This impact is expected to be partly offset by continued concerns regarding the pace of global growth in the context of a persistent European debt crisis and a projected slowdown in the large economies including the USA and China. The price of the Jamaica Dollar vis-à-vis the US dollar could depreciate further in the September 2012 quarter, relative to the June 2012 quarter. This is in a context of an expected decline in foreign currency inflows from major earners particularly sugar and tourism. However, payments are expected to decline marginally due to lower spending on fuel. Domestic Capacity Conditions Jamaica’s output gap is forecasted to become negative in the September 2012 quarter as the pace of output growth slows below the country’s potential (see Figure 5.3).18 This decline in the output gap relative to the June 2012 quarter would therefore provide a countervailing impulse to any potential price increases in the quarter. A positive output gap was estimated for the June 2012 quarter as the domestic economy was forecasted to continue to expand relative to FY2011/12 and the rate of expansion approached that of the country’s potential.19 The economy is expected to grow at a pace below potential for the rest of the fiscal year, suggesting that domestic capacity conditions will limit potential price increases. Announced Price Changes Inflation in the September 2012 quarter will be affected by significant declines in the cost of communication rates. This reduction comes against the background of a reduction in cross network rates of the local mobile competitors by the Office of Utilities Regulation (OUR). Reductions in rates were as high as 62.0 per cent. However, the impact of these reductions will be partially countered by an increase in termination rates announced in the FY2012/13 budget. In addition

18 The output gap is calculated as actual output minus potential output. 19 Potential output is measured using a simple linear trend, accounting for structural breaks.



183.1

40.0

142.3

157.9

134.7

106.3

0.020.040.060.080.0

100.0120.0140.0160.0180.0200.0

Dec

-05

Jun-

06S

ep-0

6D

ec-0

6Ju

n-07

Sep

-07

Dec

-07

Mar

-08

Jun-

08S

ep-0

8D

ec-0

8M

ar-0

9Ju

l-09

Sep

-09

Dec

-09

Mar

-10

Jun-

10S

ep-1

0D

ec-1

0M

ar-1

1Ju

n-11

Sep

-11

Dec

-11

Mar

-12

Apr

-12

May

-12

Jun-

12

166.9

100.092.3

160.6

151.8 144.4

148.8141.5

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

Jun-

06S

ep-0

6D

ec-0

6Ju

n-07

Sep

-07

Dec

-07

Mar

-08

Jun-

08S

ep-0

8D

ec-0

8M

ar-0

9Ju

l-09

Sep

-09

Dec

-09

Mar

-10

Jun-

10S

ep-1

0D

ec-1

0M

ar-1

1Ju

n-11

Sep

-11

Dec

-11

Mar

-12

Apr

-12

May

-12

Jun-

12

Figure 5.5 Index of Present Conditions of Businesses

Marginal upturn in inflation expectations

Figure 5.6 Index of Future Business Conditions

to the reductions in the cost of communication, there is expected to be a marked decrease in electricity rates by the major supplier. The expected reduction in electricity rates stems from the rebate for the overcharge on fuel purchased by an independent power supplier, a new efficiency heat rate target set by the OUR and lagged reduction in the cost of fuel. Inflation Expectations The Bank’s surveys of business expectations conducted in May and June 2012, both suggested an upturn in inflation expectations relative to the outlook at March 2012 (see Figure 5.4). This marginal upturn in expectations may be symptomatic of the increased pace of depreciation in the value of the domestic currency since March and the expected impact of the tax measures from the FY2012/13 budget. Of note, respondents continued to highlight utilities as the main driver of increases in their cost of production over the next twelve months. The other factors expected to drive increases in the cost of production are fuel/transportation and stock replacement, with the latter reflecting a sharp upward movement. Output For the September 2012 quarter, Jamaica’s output growth is projected to remain relatively flat in the range of negative 0.5 per cent to 0.5 per cent. This performance should reflect growth in Agriculture, Forestry & Fishing, Electricity & Water Supply and Hotels & Restaurants. However, Mining & Quarrying and Manufacture are expected to contract. Expansion in Agriculture, Forestry & Fishing should be reflected in both domestic and export agriculture. Specifically, export agriculture should be buoyed by a rehabilitation of cocoa fields which has been supported by the GOJ. Domestic agriculture should continue to reflect a trend improvement in productivity. Hotel & Restaurants is projected to continue to expand in the context of a forecast for an increase in stopover arrivals relative to the corresponding quarter of the previous year. Growth in stopover arrivals should reflect continued increase in airlifts.



-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

(%)

Figure 5.7 Consumer Price Index

(Annual point to point change)

Figure 5.8 Inflation Forecast Fan chart (per cent)

The forecasted contraction in Mining & Quarrying is largely due to a planned reduction in capacity utilization in the alumina industry, particularly at one alumina plant. In addition, the bauxite industry is expected to contract marginally reflecting a normalization of production to average capacity utilization. The projection for Manufacture is premised primarily on an anticipated decline in petrol refining as a result of a shift in the regular maintenance period. Scheduled maintenance was undertaken in the June 2011 quarter but is expected to occur in the September 2012 quarter. Consistent with the projection for a relatively weak outturn in domestic output for the September 2012 quarter, the results of the BOJ’s Survey of Expectations for May/June 2012 suggests that businesses’ perception for both present and future business conditions fell, with the former reflecting a greater decline. The negative perception of economic conditions by businesses may be reflecting the current uncertainty surrounding the timing of an agreement with the IMF on Jamaica’s medium-term economic programme (see Figures 5.5 and 5.6). Similar to this result, the Jamaica Conference Board’s Survey of Business and Consumer Confidence for the June 2012 quarter indicated a decline in both consumer and business confidence. Outlook - FY2012/13 The forecast for domestic headline inflation has been revised upwards to be within the range of 10.0 per cent to 12.0 per cent from the previous forecasted range of 6.0 per cent to 8.0 per cent (see Figure 5.7). However, the point forecast is close to the lower bound. Despite the revised inflation projections, Jamaica’s output is projected to expand in the range of -0.5 per cent to 0.5 per cent for FY2012/13, at a slower pace relative that recorded in the previous fiscal year. Jamaica’s inflation forecast was revised upwards mainly as a result of the fiscal measures announced by the GOJ in its FY2012/13

0.0

5.0

10.0

15.0

20.0

25.0

30.0

projection actual

target lower bound target upper bound



budget and the outlook for international commodity prices. However, the relatively tight fiscal stance coupled with an overall weak domestic and international demand environment should significantly constrain price increases over the rest of the fiscal year. With regards to imported inflation, international grains prices are forecasted to record marked increases relative to the previous fiscal year. Grains prices are being impacted by adverse weather conditions affecting the main grains producing countries, particularly the USA, despite a return to El Niño Southern Oscillation (ENSO) neutral conditions during the June 2012 quarter.20 In addition, a projection for moderate movement in crude oil prices reflects the outlook for continued relatively weak global demand. This outlook for commodity prices, in the context of an uptick in the pace of depreciation in the fiscal year, could result in an increase in imported inflation. The growth outlook for the Jamaican economy in FY2012/13 continues to reflect the projection of continued weak domestic demand and a slower growth in the global economy relative to FY2011/12. However, the current forecast for global growth for FY2012/13 has been revised upwards marginally from the BOJ’s previous projection. This revision is based on a more optimistic forecast for expansion in the Japanese economy. However, in Europe, Spain has emerged as another country with fiscal challenges. This has increased concerns about the health of the overall European Union and should continue to limit global growth. Continued weak global demand is expected to remain as a constraint to increased external demand for Jamaican goods and services. However, despite the weak global environment, remittance inflows to Jamaica are forecasted to remain favourable.

20 During ENSO neutral conditions there is no evidence of either El Niño or La Niña and therefore weather patterns return to their normal cycle and there are fewer extremes like droughts and floods.



Risks The risks to the inflation forecast are biased to the upside (see Figure 5.8). Upside risks include the possibility of a larger than expected impact of domestic fiscal policy measures on prices. Additionally, there is the possible impact of adverse weather on domestic crop production since the 2012 Atlantic Hurricane Season is projected to be slightly above average.21 Also, greater than anticipated increases in the prices of international commodities arising from renewed geopolitical tensions, adverse weather and stronger global demand could result in higher domestic prices. The downside risk largely relates to weaker than expected domestic demand constraining potential upward price impulses. With regards to the forecast for domestic output, the risks are skewed to the downside. These risks include a larger than anticipated impact on demand and output from the fiscal measures. Additionally, there is the possibility that adverse weather could impact output. Upside risks include a greater than anticipated impact of the various infrastructure projects and a stronger than expected expansion in the global economy, in particular, the economies of the USA and China. Monetary Policy In spite of the recent fiscal measures implemented by the GOJ, inflation is expected to be well contained in the September 2012 quarter. The continued tight fiscal stance and the expected improvement in fiscal sustainability should result in a boost to investor confidence. In addition, domestic demand conditions should pose limited upside risk to inflation. However, given the concerns about the movement in international commodity prices and heightened uncertainties in the international financial market, the Bank will continue its monetary policy adjustments to ensure the maintenance of a stable macroeconomic environment.

21 Average storm activity calculated with data from 1950 to 2000 is for 9.6 storms, 5.9 hurricanes with 2.3 being major hurricanes. In April 2012, the Colorado State University forecasting team projected 10 Storms, 4 hurricanes with two being major hurricanes.


Appendices, A. Fiscal Developments 44

A. Fiscal Developments: Provisional June 2012 Quarter

Provisional data indicates that Central Government recorded a fiscal deficit of $8.8 billion or 0.6

per cent of GDP for the June 2012 quarter relative to a budgeted fiscal deficit of $10.2 billion or

0.8 per cent of GDP. The outturn for the quarter largely reflected higher than budgeted Revenue

& Grants as well as lower than budgeted Expenditure. The primary surplus was approximately

$13.1 billion or 0.94 per cent of GDP for the quarter compared to the budgeted surplus of $12.1

billion or 0.91 per cent of GDP. Concurrently, the current deficit was approximately $4.4 billion

or 0.3 per cent of GDP relative to a current deficit of $5.6 billion or 0.4 per cent of GDP implied

in the budget (see Table 1a).

Revenue & Grants for the quarter was $76.6 billion or $522 million above the target outlined in

the FY2012/13 budget and reflected higher Tax & Non-Tax Revenues and Grants partially offset

by shortfalls from Bauxite Levy and Capital Revenue. The increase in Tax Revenue was

reflected in all major categories with the exception of Environmental Levy. The largest increases

were recorded for ‘Tax on Interest’, ‘GCT (imports)’ and ‘Stamp Duty (local)’. Notwithstanding

the overall increases, there were notable shortfalls in revenue from ‘SCT (imports)’ and ‘Other

Companies’.

Total Expenditure for the June quarter was $85.4 billion or $830.3 million below budget,

reflecting containment in Recurrent Expenditure and Capital Expenditure. The lower than

budget Recurrent Expenditure was reflected in Programmes and Interest which were $426.9

million and $317.9 million lower than budgeted, respectively. Capital Expenditure was $71.4

million lower than budgeted.

The C-Efficiency (GCT) ratio22 of 46.4 per cent for the quarter indicated that collections based

on estimated consumption was higher relative to the 5-year average23, possibly reflecting the

22 C –efficiency measures the share of tax revenues in the tax base ( consumption) normalized by the tax rate 23 Average of June quarters only.

AAppppeennddiicceess



impact of new tax measures that were implemented in June24. Similarly, the C-Efficiency

(GCT/SCT) ratio for the June 2012 quarter of 65.7 per cent was significantly higher than the

five-year average25 of 54.6 per cent and also higher than the 58.8 per cent recorded in the

corresponding quarter of the previous fiscal year.

For the June 2012 quarter, the Government secured financing primarily from the domestic

market. A total of $25.9 billion was raised from the issue of 4 instruments. Of the instruments

offered, 3 were at variable rates (VR) of interest while one was a fixed rate (FR) instrument.

These offers were in comparison to four FR and one VR instruments issued in the June 2011

quarter. For the review period, the weighted average age of new debt was 2.6 years relative to

8.6 years for the March 2012 quarter and 11.3 years for the corresponding period in the previous

fiscal year (see Table 1b). The decline relative to the previous quarters reflects investors’

increased appetite for shorter term instruments due to uncertainties surrounding the FY2012/13

Budget and the commencement of a new IMF agreement.

24 GCT data includes arrears 25 Average of June quarters only.



Table 1a

CENTRAL GOVERNMENT SUMMARY ACCOUNTS FY 2012/13 (J$MN)

FY 2012/13 Budget Q1 Q1 Variance % Revenue & Grants 76589.8 76067.8 522.0 0.7 Revenue 76322.0 75824.2 497.9 0.7 Tax Revenue 71893.1 71466.3 426.7 0.6 Non-Tax Revenue 3936.6 3833.3 103.3 2.7 Bauxite Levy 337.9 369.4 -31.5 -8.5 Capital Revenue 154.5 155.1 -0.6 -0.4 Grants 267.7 243.6 24.1 9.9 Expenditure 85395.3 86225.7 -830.3 -1.0

Recurrent Expenditure 80524.6 81283.6 -758.9 -0.9

Programmes 19436.6 19863.5 -426.9 -2.1

Wages & Salaries 39138.5 39152.6 -14.2 0.0

Interest 21949.5 22267.4 -317.9 -1.4 Domestic 11059.6 11050.8 8.7 0.1 Foreign 10890.0 11216.6 -326.6 -2.9 Capital Expenditure 4870.7 4942.1 -71.4 -1.4

Non-interest expenditure 63445.8 63958.3 -512.4 -0.8

Fiscal Balance -8805.6 -10157.9 1352.3 -13.3 Current Balance -4357.1 -5614.5 1257.4 -22.4 Primary balance 13144.0 12109.5 1034.4 8.5

In Percent of

GDP BR 0.6 0.8 CB -0.3 -0.4 PB 0.94 0.91 IP 1.6 1.7 FSR -1.1 -1.1 NIE 4.5 4.8

see Key below



Key BR = Borrowing Requirement = Fiscal Balance as a percent of GDP

CB= Current Balance = Current Revenue-Current Expenditure as a percent of GDP PB= Primary Balance = Total Revenues-Total Expenditures less Interest Payments (IP) as a percent of GDP IP= Interest Payments as a percent of GDP

FSR=Fiscal Stability Ratio = (Overall Balance/ Total Revenue) - 1

International Benchmarks

BR greater than 3% of GDP often indicates serious fiscal imbalance

FSR closer to zero indicates more stable government finances

Negative CB ratio of less than 1% indicates dissaving or a need for fiscal adjustment as the public sector is borrowing

for consumption

PB ratio above zero indicates major fiscal adjustment to cover interest on past obligations

* Recurrent Expenditure includes programmes, wages and salaries and interest payments.



Table 1b

Government New Issues FY 2011/12 vs 2012/13

J$ millions

New Debt Raised # of Issues

% of Total Issues

New Debt Raised # of Issues

% of Total Issues

Variable Rate 18,078.14 1 64.46 Variable Rate 25,140.49 3 97.23 Fixed Rate 9,966.47 4 35.54 Fixed Rate 715.23 1 2.77 US$ Linked 0.00 0 0.00 US$ Linked 0.00 0 0.00

28,044.61 5 25,855.72 4

Total 28,044.61 5 100.00 Total 25,855.72 4 100.00

Variable Rate 0.00 Variable Rate 0.00 Fixed Rate 0.00 Fixed Rate 0.00 US$ Linked 0.00 US$ Linked 0.00JDX elligible called bonds 0.00 JDX elligible called bonds 0.00

0.00 0.00

Above 5 28,044.61 5 100.00 Above 5 3,008.13 1 11.63 5 and Below 0.00 0 0.00 5 and Below 22,847.59 3 88.37

Total 28,044.61 5 100.00 Total 25,855.72 4 100.00

FR J$ Long-term 9,966.47 4 35.54 FR J$ Long-term 0.00 0 0.00

2010/11 2011/12 2012/13Age of New Debt

Simple Average 12.3 17.8 4.3

Weighted Average 4.9 11.3 2.6

Maturities Maturities

Maturity Profile of New Debt Maturity Profile of New Debt

2011/12 2012/13April - June April - June

New Debt Issued New Debt Issued


Appendices, B. Monetary Policy Developments 49

B. MONETARY POLICY DEVELOPMENTS 27/04/2000 30-day Reverse Repurchase Rate was reduced from 17.30 per cent to 17.00 per cent. 01/06/2000 Liquid assets ratio of commercial banks’ and FIA institutions in respect of local and foreign currency

liabilities reduced from thirty-three per cent (33%) to thirty-two per cent (32%).

Cash reserve ratio of commercial banks’ and FIA institutions in respect of local and foreign currency liabilities reduced from fifteen per cent (15%) to fourteen per cent (14%).

The maximum liquid asset ratio for Building societies was reduced by one percentage point resulting in the dual liquid asset ratios of five per cent and thirty-two per cent (5% and 32%) for Building Societies. The maximum cash reserve ratio for Building Societies was reduced by one percentage point resulting in dual cash reserve ratios of one per cent and fourteen per cent (1% and 14%) in respect of local and foreign currency deposits.

28/07/2000 30-day Reverse Repurchase Rate was reduced from 17.00 per cent to 16.75 per cent. 11/08/2000 30-day Reverse Repurchase Rate was reduced from 16.75 per cent to 16.45 per cent. 01/09/2000 Liquid assets ratio of commercial banks’ and FIA institutions in respect of local and foreign currency

liabilities reduced from thirty-two per cent (32%) to thirty-one per cent (31%).

Cash reserve ratio of commercial banks’ and FIA institutions in respect of local and foreign currency liabilities reduced from fourteen per cent (14%) to thirteen per cent (13%).

The maximum liquid asset ratio for Building societies was reduced by one percentage point resulting in the dual liquid asset ratios of five per cent and thirty-one per cent (5% and 31%) for Building Societies. The maximum cash reserve ratio for Building Societies was reduced by one percentage point resulting in dual cash reserve ratios of one per cent and thirteen per cent (1% and 13%) in respect of local and foreign currency deposits.

18/09/20000 Bank of Jamaica introduces 270-day and 365-day reverse repurchase instruments at 17.6 and 18.0

per cent respectively. 04/10/20000 Interest rates on the 270-day and 365-day instruments were increased to 20.0 and 22.0 per cent

respectively. 23/10/2000 Interest rates on the 270-day and 365-day instruments were reduced to 17.6 and 18.0 per cent

respectively.



24/11/2000 Interest rates on the 270-day and 365-day instruments were increased to 20.0 and 22.0 per cent respectively.

28/12/2000 Interest rate on the 365-day instrument was reduced to 21 per cent. 14/02/2001 Interest rates on the 365-day and 270-day instruments were reduced to 20.00 per cent and 19.25 per

cent respectively. 20/02/2001 Interest rates on the 365-day and 270-day instruments were reduced to 19.50 per cent, and 18.75 per

cent respectively. 01/03/2001 Liquid assets ratio of commercial banks’ and FIA institutions in respect of local and foreign currency

liabilities reduced from thirty-one per cent (31%) to thirty per cent (30%). Cash reserve ratio of commercial banks’ and FIA institutions in respect of local and foreign currency

liabilities reduced from thirteen per cent (13%) to twelve per cent (12%). The maximum liquid asset ratio for Building societies was reduced by one percentage point resulting

in the dual liquid asset ratios of five per cent and thirty per cent (5% and 30%) for Building Societies. The maximum cash reserve ratio for Building Societies was reduced by one percentage point resulting

in dual cash reserve ratios of one per cent and twelve per cent (1% and 12%) in respect of local and foreign currency deposits.

08/03/2001 Interest rates on the 365-day, 270-day instruments were reduced to 19.00 per cent, 18.25 per cent per

cent respectively. 12/03/2001 Interest rates on the 365-day, 270-day, 180-day, 120-day, 90-day, 60-day and 30-day instruments were

reduced to 18.50 per cent, 17.75 per cent, 16.70 per cent, 16.40 per cent, 16.25 per cent, 16.15 per cent and 16.00 per cent respectively.

22/03/2001 Interest rates on the 365-day, 270-day, 180-day, 120-day, 90-day, 60-day and 30-day instruments were


11/04/2001 Interest rates on the 365-day and 270-day instruments were reduced to 17.50 per cent and 16.75 per

cent respectively. 21/05/2001 Interest rates on the 365-day, 270-day, 180-day, 120-day, 90-day, 60-day and 30-day instruments were


01/06/2001 Liquid assets ratio of commercial banks’ and FIA institutions in respect of local and foreign currency

liabilities reduced from thirty per cent (30%) to twenty nine per cent (29%).



Cash reserve ratio of commercial banks’ and FIA institutions in respect of local and foreign currency liabilities reduced from twelve per cent (12%) to eleven per cent (11%).

The maximum liquid asset ratio for Building societies was reduced by one percentage point resulting

in the dual liquid asset ratios of five per cent and twenty nine per cent (5% and 29%) for Building Societies.

The maximum cash reserve ratio for Building Societies was reduced by one percentage point resulting

in dual cash reserve ratios of one per cent and eleven per cent (1% and 11%) in respect of local and foreign currency deposits.



25/06/2001 Interest rates on the 180-day, 120-day, 90-day, 60-day and 30-day instruments were reduced to 14.75

per cent, 14.55 per cent, 14.45 per cent, 14.35 per cent and 14.25 per cent respectively. 29/06/2001 The Bank of Jamaica introduced Certificates of Deposits to the range of instruments used in

open market operations. All the terms and conditions applicable to Reverse Repurchase transactions apply to Certificates of Deposits, with the exception that the latter are covered by the central bank’s assets as against Government securities. Central Bank deposits which are maintained in statement form (i.e. no physical certificate is issued) will continue to be used for placements of seven (7) days or less.

01/09/2001 Liquid assets ratio of commercial banks and FIA institutions in respect of local and foreign currency

liabilities reduced from twenty nine per cent (29%) to twenty eight per cent (28%). Cash reserve ratio of commercial banks’ and FIA institutions in respect of local and foreign currency

liabilities reduced from eleven per cent (11%) to ten per cent (10%). The maximum liquid asset ratio for Building societies was reduced by one percentage point resulting

in the dual liquid asset ratios of five per cent and twenty eight per cent (5% and 28%) for Building Societies.

The maximum cash reserve ratio for Building Societies was reduced by one percentage point resulting

in dual cash reserve ratios of one per cent and ten per cent (1% and 10%) in respect of local and foreign currency deposits.

30/10/2001 Interest rates on the 365-day, 270-day, 180-day, 90-day and 60-day instruments were increased to

19.90 per cent, 19.45 per cent, 15.50 per cent, and 15.00 per cent, 14.75 per cent and 14.55 per cent, respectively

28/12/2001 Interest rates on the 365-day, 270-day, 180-day, 120-day, 90-day and 60-day instruments were reduced

to 18.90 per cent, 18.40 per cent, 15.00 per cent, and 14.55 per cent, 14.45 per cent and 14.35 per cent, respectively.



09/01/2002 Interest rates on the 365-day and 270-day instruments were reduced to 17.90 per cent and 17.00per

cent, respectively. 06/02/2002 Interest rates on the 365-day, 270-day, 180-day, 120-day, 90-day, 60-day and 30-day instruments were

reduced to 16.70 per cent, 15.90 per cent, 14.70 per cent, 14.30 per cent, 14.20 per cent, 14.10 per cent and 14.00 per cent, respectively.


reduced to 15.80 per cent, 15.00 per cent, 14.40 per cent, 14.05 per cent, 13.95 per cent, 13.85 per cent and 13.95 per cent, respectively.

01/03/2002 Liquid assets ratio of commercial banks and FIA institutions in respect of local and foreign currency

liabilities were reduced from twenty eight per cent (28%) to twenty seven per cent (27%). Cash reserve ratio of commercial banks and FIA institutions in respect of local and foreign currency

liabilities reduced from ten per cent (10%) to nine per cent (9%). 11/03/2002 Interest rates on Bank of Jamaica 30-day, 60-day, 90-day, 120-day, 180-day, 270-day and 365-day

open market instruments were reduced from 13.75 per cent, 13.85 per cent, 13.95 per cent, 14.05 per cent, 14.40 per cent, 15.00 per cent and 15.80 per cent to 13.25 per cent, 13.35 per cent, 13.45 per cent, 13.55 per cent, 13.80 per cent, 14.20 per cent, and 15.00 per cent, respectively.

11/07/2002 Interest rates on Bank of Jamaica 30-day, 60-day, 90-day, 120-day, 180-day, 270-day, and 365-day

open market instruments were reduced from 13.25 per cent, 13.35 per cent, 13.45 per cent, 13.55 per cent, 13.80 per cent, 14.20 per cent, and 15.00 per cent to 12.95 per cent, 13.05 per cent, 13.15 per cent, 13.25 per cent, 13.45 per cent, 14.00 per cent, and 14.90 per cent, respectively.

01/09/2002 Liquid Assets ratio of commercial banks, FIA institutions and of building societies, in respect of local

and foreign currency liabilities was reduced from twenty seven per cent (27%) to twenty three per cent (23%).

07/08/2002 Interest rates on Bank of Jamaica 270-day and 365-day open market instruments were reduced from

14.00 per cent to 13.85 per cent and from 14.90 per cent to 14.50 per cent, respectively. 09/09/2002 Interest rates on Bank of Jamaica 90-day and 120-day open market instruments were increased from

13.15 per cent to 17.25 per cent and from 13.25 per cent to 17.05 per cent, respectively. 09/10/2002 Interest rates on Bank of Jamaica 90-day and 120-day open market instruments were increased from

17.25 per cent to 19.25 per cent and from 17.05 per cent to 19.40 per cent, respectively. 28/10/2002 Interest rates on Bank of Jamaica 90-day and 120-day open market instruments were reduced from

19.25 per cent to 18.25 per cent and from 19.40 per cent to 18.40 per cent, respectively.



01/11/2002 The interest rate chargeable in respect of breaches by commercial banks, of the cash reserve and liquid assets ratios in respect of Jamaica Dollar liabilities, was reduced from 69 per cent per annum to 45 per cent per annum.

The interest rate chargeable in respect of breaches by building societies and institutions licensed under

the Financial Institutions Act, of the cash reserve and liquid assets ratios in respect of Jamaica Dollar liabilities, was adjusted from one-sixth of one per centum per day to 45 per cent per annum.

10/01/2003 The Bank of Jamaica instituted a “Special Deposit” requirement for Commercial Banks and

institutions licensed under the Financial Institutions Act. Each institution will be required to place cash deposits with the Central Bank equivalent to 5% of its Jamaican Dollar prescribed liabilities.

10/02/2003 The Bank of Jamaica introduced a special five-month open market instrument which earned interest at

30% per annum. This instrument was introduced in a context of significant Jamaica dollar liquidity and protracted instability in the foreign exchange market.

14/02/2003 The Bank of Jamaica withdrew the special five- month open market instrument which was introduced

on 10 February 2003. The decision to remove this instrument came against the background of tight Jamaica dollar liquidity and the appreciation in the exchange rate over the previous four days. The removal was also in response to representations made to the Bank of Jamaica by financial institutions and understandings reached with respect to the development of foreign exchange market protocols.

19/03/2003 Interest rates on Bank of Jamaica’s 180-day, 270-day and 365-day open market instruments were

increased to 19.65 per cent, 21.50 per cent and 24.0 per cent, respectively. 26/03/2003 Interest rates on Bank of Jamaica 30-day, 60-day, 90-day, 120-day, 180-day, 270-day and 365-day

open market instruments were increased to 15.00 per cent, 15.30 per cent, 20.00 per cent, 24.00 per cent, 33.15 per cent, 34.50 per cent and 35.95 per cent, respectively.

25/04/2003 Interest rates on Bank of Jamaica 180-day, 270-day and 365-day open market instruments were

reduced to 28.00 per cent, 32.50 per cent and 33.00 per cent, respectively. 19/05/2003 The interest rate applicable to overdrafts on accounts held with the Bank of Jamaica was increased to

65.0 per cent per annum. 24/06/2003 Interest rates on Bank of Jamaica 180-day, 270-day and 365-day open market instruments were

reduced to 26.50 per cent, 29.50 per cent and 30.00 per cent, respectively. 08/07/2003 Interest rates on Bank of Jamaica 270-day and 365-day open market instruments were reduced to

27.50 per cent and 28.00 per cent, respectively. 04/08/2003 Interest rates on Bank of Jamaica 90-day, 120-day, 180-day, 270-day and 365-day open market

instruments were reduced to 18.00 per cent, 22.00 per cent, 25.00 per cent, 25.75 per cent and 26.00 per cent, respectively.



09/09/2003 Interest rates on Bank of Jamaica 120-day, 180-day, 270-day and 365-day open market instruments were reduced to 21.00 per cent, 23.50 per cent, 23.75 per cent and 24.00 per cent, respectively.

17/10/2003 Bank of Jamaica withdrew its 270-day and 365-day instruments from open market trading. 29/10/2003 Bank of Jamaica returned its 270-day and 365-day instruments to open market trading at 23.75 per

cent and 24.00 per cent respectively. 10/12/2003 Interest rates on Bank of Jamaica 90-day 120-day, 180-day, 270-day and 365-day open market


09/01/2004 Interest rates on Bank of Jamaica 90-day 120-day, 180-day, 270-day and 365-day open market


21/01/2004 Interest rates on Bank of Jamaica 60-day, 90-day, 120-day, 180-day, 270-day and 365-day open

market instruments were reduced to 15.20 per cent, 15.50 per cent, 17.00 per cent, 18.25 per cent, 20.00 per cent and 21.00 per cent respectively.

26/01/2004 Interest rates on Bank of Jamaica 30-day, 60-day, 90-day, 120-day, 180-day, 270-day and 365-day

open market instruments were reduced to 14.85 per cent, 15.00 per cent, 15.10 per cent, 16.00 per cent, 17.25 per cent, 18.75 per cent and 20.00 per cent, respectively.

16/02/2004 Interest rates on Bank of Jamaica 120-day, 180-day, 270-day and 365-day open market instruments

were reduced to 15.50 per cent, 16.25 per cent, 17.75 per cent and 19.00 per cent, respectively. 27/02/2004 Interest rates on Bank of Jamaica 180-day, 270-day and 365-day open market instruments were

reduced to 16.00 per cent, 17.25 per cent and 18.50 per cent, respectively. 10/03/2004 Interest rates on Bank of Jamaica 270-day and 365-day open market instruments were reduced to

16.95 per cent and 17.95 per cent, respectively. 10/03/2004 Pursuant to Section 15 (2) (h) of the Banking Act and the Financial Institutions Act, and Regulation 38

(h) of the Bank of Jamaica (Building Societies) Regulation, the Minister of Finance determined that all debt securities or instruments issued by the Government of Jamaica, whether denominated in Jamaican dollars or in a foreign currency and irrespective of their original maturity terms, shall, within nine months of their maturity date be designated Liquid Assets.





19/04/2004 Interest rates on Bank of Jamaica 30-day, 60-day, 90-day, 120-day, 180-day, 270-day and 365-day open market instruments were reduced to 14.40 per cent, 14.50 per cent, 14.60 per cent, 14.85 per cent, 15.30 per cent, 16.00 per cent and 16.90 per cent, respectively.









07/02/2005 The Bank of Jamaica reduced the Special Deposit holdings for commercial banks and FIA licensees by

two (2) percentage points. Accordingly, these institutions, until further notified, are required to maintain with the Bank of Jamaica as a Special Deposit, an amount wholly in the form of cash, representing three (3) per cent of their prescribed liabilities.



These rate adjustments were underpinned by continued stability in the exchange rate, reflecting

buoyant foreign exchange inflows from tourism and remittances. Also, the Bank’s net international reserves remained around US$1.8 billion, a level that was more than adequate to underwrite near term stability. In addition, inflation in the first quarter of 2005 was expected to continue on a downward trend engendering a return to single digit inflation in the forthcoming fiscal year.

16/05/2005 The Bank of Jamaica reduced the Special Deposit holdings for commercial banks and FIA licensees by

two (2) percentage points. Accordingly, these institutions, until further notified, are required to maintain with the Bank of Jamaica as a Special Deposit, an amount wholly in the form of cash, representing one (1) per cent of their prescribed liabilities.



The adjustments were consistent with the steady improvement in Jamaica’s economic environment as

reflected in buoyant foreign exchange inflows, stability in the money and foreign exchange markets



and a strong international reserve position. Furthermore, the near-term prospects for production and prices continued to be very favourable with strong recovery expected in domestic agriculture as well as ongoing expansion in tourism and mining activities. In addition, it was expected that the normalization of food supplies and continued stability in the foreign exchange market would help to contain inflation during the 2005/2006 fiscal year.

27/05/2005 The Bank phased out its reverse repurchase agreements. This facilitated consistency in the accounting

treatment (under International Financial Reporting Standards) of open market instruments by holders. 18/04/2006 The Bank suspended the acceptance of placements on its open market operations (OMO) instruments

with tenors of 270 days and 365 days, until further advised. The OMO instruments, along with corresponding interest rates, that remained on offer were 30-days: 12.6 per cent; 60-days: 12.70 per cent; 90-days: 12.75 per cent; 120-days: 12.85 per cent; and 180-days: 13.00 per cent.

01/05/2006 The Bank removed the requirement that deposit-taking institutions must hold some portion of their

assets as a Special Deposit with the Central Bank. This requirement was introduced in January 2003 to stabilize the financial markets. The initial deposit requirement was set at 5 per cent of prescribed liabilities and this was reduced to 1 per cent in two steps between February and May 2005. The significant improvement in macroeconomic conditions and the positive outlook for fiscal year 2006/07 allowed for the return of the remaining deposits. The sum due to financial institutions as at 28 April 2006 was J$1 564.1 million.

12/05/2006 Interest rates on Bank of Jamaica 30-day, 60-day, 90-day, 120-day and 180-day open market







instruments were reduced to 11.65 per cent, 11.70 per cent, 11.80 per cent, 11.85 per cent and 12.00 per cent, respectively. This policy action comes against the background of continued robust economic performance and favourable medium term economic outlook.

18/01/2007 The Bank of Jamaica offered a Special One-Year Variable rate Instrument to Primary Dealers and

Commercial Banks. Interest payments on this instrument will be made quarterly. The initial coupon is 11.80 per cent per annum, the rate being paid on a Bank of Jamaica 90-day Certificate of Deposit. Subsequent interest payments will be calculated at 1.00 percentage point above the Bank of Jamaica 90-day rate applicable at the beginning of each quarterly interest period.



The offer was made in the context of the redemption of Government of Jamaica domestic debt instruments on 18 January 2007 which would increase the level of liquidity in the financial system beyond normal requirements. The Bank continues to offer its regular issues of Certificates of Deposits ranging from 30 days to 180 days.

19/06/2007 The Bank of Jamaica offered a Special Two-Year Variable rate Instrument to Primary Dealers and

Commercial Banks during the period 19-22 June 2007. The instrument will be amortized in two equal tranches on 19 June 2008 and 19 June 2009 with quarterly interest payments. The initial coupon is 11.80 per cent per annum, the rate being paid on a Bank of Jamaica 90-day Certificate of Deposit. Subsequent interest payments will be calculated at 1.25 percentage point above the Bank of Jamaica 90-day rate applicable at the beginning of each quarterly interest period.

The offer was made in the context of the exceptionally high level of liquidity of Jamaica Dollar

liquidity anticipated during the offer period. The Bank continues to offer its regular issues of Certificates of Deposits ranging from 30 days to 180 days.

04/07/2007 As part of its liquidity management strategy, the Bank of Jamaica offered a Special Two-Year

Variable Rate Instrument to Primary Dealers and Commercial Banks from 04 July 2007 to 09 July 2007. The instrument, with an initial coupon of 11.98 per cent, will be amortized in two equal tranches on 02 January 2009 and 03 July 2009 with quarterly interest payments. Subsequent interest payments will be calculated at 2.00 percentage points above the Bank of Jamaica 90-day rate applicable at the beginning of each quarterly interest period.

The Bank of Jamaica will continue to offer its regular issues of Certificates of Deposit

ranging from 30 days to 180 days 06/09/2007 As part of its liquidity management strategy, the Bank of Jamaica offered a Special Two-Year

Variable Rate Instrument to Primary Dealers and Commercial Banks commencing from 06 September 2007 to 12 September 2007. The instrument, with an initial coupon of 12.21 per cent per annum, will be amortized in two equal tranches on 05 September 2008 and 04 September 2009 with quarterly interest payments. Subsequent interest payments will be calculated at 2.00 percentage points above the Bank of Jamaica 90-day rate applicable at the beginning of each quarterly interest period.

The Bank of Jamaica will continue to offer its regular issues of Certificates of Deposit ranging from 30

days to 180 days. 18/09/2007 The Bank of Jamaica accepted subscriptions on a Special One-Year Certificate of Deposit from 18

September 2007 to 26 September 2007. As is customary, this instrument was offered to Primary Dealers and Commercial Banks. Interest on this instrument will be payable semi-annually at a fixed rate of 14.00 per cent per annum. The offer was designed to effectively manage the level of Jamaica Dollar liquidity anticipated in the financial system.

12/10/2007 The Bank of Jamaica, as part of its liquidity management strategy, offered a Special Eighteen-Month

Variable Rate Instrument to Primary Dealers and Commercial Banks. The instrument will be amortized in two equal tranches on 11 July 2008 and 14 April 2009 with quarterly interest payments. The initial coupon is 14.34 per cent per annum. Subsequent interest payments will be calculated at



1.625 percentage points above the Government of Jamaica 90-day weighted average Treasury Bill yield applicable at the beginning of each quarterly interest period.


days to 180 days. 16/11/2007 The Bank of Jamaica, as part of its liquidity management strategy, offered a Special Twelve-Month

Variable Rate Instrument to Primary Dealers and Commercial Banks. The instrument will be amortized on 14 November 2008 with quarterly interest payments. The initial coupon is 13.46 per cent per annum. Subsequent interest payments will be calculated at 1.5 percentage points above the Government of Jamaica 90-day weighted average Treasury Bill yield applicable at the beginning of each quarterly interest period.


days to 180 days. 09/01/2008 The Bank of Jamaica implemented the following changes to interest rates payable on open-market

instruments: The realignment of rates placed the Bank in a better position to manage the Jamaica Dollar liquidity

that emanated from the maturity of both of both Bank of Jamaica and Government of Jamaica instruments as well as the reflow of currency issued for the Christmas season. The revised rate structure offered investors a range of options that more closely reflected the then existing money market rates.

16//01/2008 Bank of Jamaica offered a 365-day Certificate of Deposit in addition to its regular suite of instruments.

This offer attracted a rate of 13.50 per cent per annum, which was consistent with the Bank’s then existing interest rate structure. The rates on 30-day to 180-day instruments remain unchanged.

18/01/2008 Bank of Jamaica offered a special 18-month, variable rate certificate of deposit (CD) to banks and

primary dealers. The CD attracted a rate of 12.80 per cent for the first 3 months. Thereafter, quarterly interest payments at the 90-day weighted average Treasury Bill rate applicable at the beginning of each interest period plus a margin of 1.5 percentage points apply.

The rates applicable to all other BOJ instruments remained unchanged. 04/02/2008 Interest rates paid on open market instruments issued by the Bank of Jamaica were revised as follows:

Tenor 30 days 60 days 90 days 120 days 180 days

Previous Rates (%)

11.65 11.70 11.80 11.85 12.00

New Rate 12.65 12.70 12.80 12.85 13.00



Tenor 30

days 60 days

90 days 120 days 180 days 365 days

Previous Rates (%)

12.65 12.70 12.70 12.85 13.00 13.50

New rate 13.50 13.70 13.90 14.00 14.20 15.00 Difference 85

bps 100 bps 120 bps 115 bps 120 bps 150 bps

The revisions reflected concerns about the rising trend in inflation and its impact on the attractiveness of Jamaica Dollar investments.

26/06/2008 Interest rates paid on Bank of Jamaica open market operations instruments were adjusted as follows:

Tenor 30

days 60 days

90 days 120 days

180 days 365 days

New rates (%) 14.00 14.20 14.40 14.50

14.70 15.50

Previous rates 13.50 13.70 13.90 14.00

14.20 15.00

The adjustment in rates was aimed at guiding domestic inflation towards a range of 12 – 15 per cent by March 2009, based on current projections for commodity prices.

01/09/2008 Bank of Jamaica offered a special 18-month, variable rate certificate of deposit (CD) to banks and

primary dealers. The CD attracted a rate of 14.58 per cent for the first 3 months. Thereafter, quarterly interest payments at the 90-day weighted average Treasury Bill rate applicable at the beginning of each interest period plus a margin of 1.25 percentage points apply.

The rates applicable to all other BOJ instruments remained unchanged. 17/10/2008 Interest rates payable on Bank of Jamaica Certificates of Deposit were adjusted as follows:

Tenor 30 days

60 days

90 days

120 days

180 days 365 days

New rates 14.65 14.85 15.05 15.15 15.35 16.70 Previous rates 14.00 14.20 14.40 14.50 14.70 15.50

The adjustment will bring rates offered by the Central Bank in line with yields applicable to

Government of Jamaica Treasury Bills and other short-dated market instruments.



12/11/2008 The Bank of Jamaica established “Intermediation Facilities” in foreign and domestic currencies, with a view to enhance the flow of credit to the financial market. The domestic currency section of the facility became operational on 24 November.

18/11/2008 In an effort to remove liquidity overhang arising from the maturity of both BOJ and GOJ securities,

and preserve order in financial markets, the Bank of Jamaica implemented the following measures:

The Bank offered a Special Certificate of Deposit to Primary Dealers and Commercial Banks, which matured on 3 December 2008. Interest payable on this instrument was 20.50% per annum. This instrument was offered from Tuesday, 18 November to Wednesday, 19 November 2008.

BOJ’s regular menu of CDs ranging from 30 days to 365 days remain

Effective 3 December, 2008, on the expiration of a 15 day notice period, the cash reserve requirement of commercial banks, merchant banks and building societies was increased by 2 percentage points to 11 per cent of Jamaica Dollar liabilities. As a consequence, the liquid asset requirement rose to 25 per cent from 23 per cent. It was intended to increase these requirements by a further 3 percentage points.

These monetary policy actions are intended to support the achievement of the inflation objective and

the maintenance of macro-economic stability.

01/12/2008 Interest rates payable on Bank of Jamaica Certificates of Deposit were adjusted as follows:

Tenor 30 days 60-days

90 days

120 days

180 days 365 days

New rates (%) 17.00 17.50 20.00 20.20

21.50 24.00

Previous rates 14.65 14.85 15.05 15.15

15.35 16.70

The increase in interest rates occurred in the context of instability in the foreign exchange market,

which was related to the sharp rise in the yields on Government of Jamaica (GOJ) Global Bonds and USD Bonds issued by Jamaican companies. The resulting spike in demand for foreign exchange by securities dealers to meet margin calls from overseas creditors, together with incremental demand for foreign exchange by a wider cross-section of persons triggered a disorderly depreciation in the exchange rate. If this condition persisted, it would precipitate higher inflation and greater macroeconomic instability.

In context of the foregoing, the Jamaica Dollar liquidity resulting from the maturity of significant sums in BOJ securities over the next three weeks makes it necessary for BOJ to take this action. Accordingly, the rise in interest rates is expected to dampen the extraordinary demand related to portfolio decisions and thereby restore predictability and order to local financial markets.



03/12/2008 The cash reserve ratio (CRR) and the liquid assets ratio (LAR) in respect of only domestic currency

liabilities of commercial banks, building societies and institutions licensed under the Financial Institutions Act were increased by 2 percentage points to 11% and 25% respectively.

02/01/2009 The CRR and the LAR for both domestic and foreign currency liabilities of commercial banks,

institutions licensed under the Financial Institutions Act and building societies were increased by 2 percentage points to 13% and 27% respectively in the case of domestic currency liabilities and 11% and 25%, respectively in the case of foreign currency liabilities.

03/02/2009 The Bank of Jamaica established the Foreign Exchange Surrender Facility for public sector entities

(PSE Facility). The aim of the facility is to centralize foreign currency demand of the public sector, especially Port Authority of Jamaica (PAJ), National Water Commission (NWC) and Petrojam. Under this facility Commercial Banks agreed to surrender fifteen per cent (15%) of foreign currency purchases daily. The pre-existing requirement where Authorized Dealers and Cambios surrender within a range of five per cent (5%) to ten per cent (10%) of their gross foreign currency purchases from commercial clients remains in effect. Therefore commercial banks are to surrender, in total between twenty per cent (20%) to twenty-five per cent (25%) of foreign currency purchases daily.

06/02/2009 The CRR and the LAR in respect of Jamaica Dollar liabilities of deposit-taking institutions were

increased by 1 percentage point to 14% and 28% respectively. The respective ratios relating to foreign currency liabilities remained unchanged at 11% and 25%.

The CRR and LAR are differentially applied to Building Societies. Domestic currency reserve

requirements are based on meeting the 40% threshold of domestic currency denominated qualifying assets in relation to domestic currency deposits and withdrawable shares. Foreign currency requirements are determined by meeting the 40% threshold of all (domestic and foreign currency) qualifying assets against all deposits and withdrawable shares. Accordingly, cash reserve ratios of one per cent and fourteen per cent (1% and 14%) and the liquid assets ratios of five per cent and 28 per cent (5.0% and 28%) apply to Building Societies, depending on whether they meet the aforementioned 40 per cent (40%) threshold in respect of the above-mentioned prescribed domestic currency liabilities.

Similarly, in the case of liabilities payable in foreign currency, cash reserve ratios of one per cent and eleven per cent (1% and 11%) and the liquid assets ratios of five per cent and 25 per cent (5.0% and 25%) apply, depending on whether the Societies meet the 40 per cent (40%) threshold. Societies that meet the prescribed 'qualifying assets' threshold attract the lower cash reserve and liquid assets requirements. The higher requirements apply to those Societies which fail to meet the prescribed thresholds.

08/04/2009 The rate payable on a 1-year Certificate of Deposit issued by Bank of Jamaica was reduced to 22.67 per

cent. Rates on other tenors remained unchanged.

Tenor 30 days 60 days 90 days 120 days 180 days 365 days New rates (%) 17.00 17.50 20.00 20.20 21.50 22.67 Previous rates 17.00% 17.50% 20.00% 20.20 21.50% 24.00%



The previous rate of 24 per cent included a premium that the Bank had offered to encourage longer term placements by investors. The adjustment on the one-year CD removed that premium and brought the yield on a 1-year placement in line with that earned on a 180 – day BOJ instrument.. It was noted that while rates had been falling in recent auctions of Treasury Bills, the then current yield on a 6-month Bill remained above the comparable BOJ rate.

03/06/2009 The Bank of Jamaica temporarily ceased offering its 1-year OMO instrument to Primary Dealers and

Commercial Banks. 24/07/2009 Interest rates applicable to Bank of Jamaica’s open market instruments were reduced by 100 basis

points. The revised schedule of rates is as follows:

Tenor 30 days 60 days 90 days 120 days 180 days New rates (%) 16.00 16.50 19.00 19.20 20.50 Previous rates 17.00 17.50 20.00 20.20 21.50

This action came against the background of positive trends in key monetary policy indicators. Notably,

the twelve month point-to point rate of inflation as at June 2009 fell to 9.0 per cent, from 12.4 per cent at the end of fiscal year 2008/09 and 24.0 per cent as at June 2008. This outturn was underpinned by continued stability in the foreign exchange market.

Additionally, the BOJ’s gross foreign reserves had stabilized at US$1.6 billion. The prospects for continued stability in money and foreign exchange markets were strengthened by the

Government’s decision to secure a Stand-by Arrangement with the International Monetary Fund. Finalization of an agreement would pave the way for additional inflows from other multilateral institutions and a reduction in the Government’s reliance on domestic financing.

30/07/2009 Effective Thursday, 30 July 2009, the interest rates applicable to Bank of Jamaica’s open market

instruments will be reduced by 150 basis points across all tenors. The revised schedule of rates is as follows:


This further rate reduction occurred against the background of continued improvements in the money

markets, reflected in the continued reduction in the yields on GOJ Treasury Bills. In addition, this action reflected the Bank’s assessment that in the context of an extended period of stability in the foreign exchange market, inflation was likely to be lower than the 11 - 14 per cent range originally targeted for fiscal year 2009/2010. Further, the demand for foreign exchange to meet current payments and for portfolio purposes had slowed. In this context, the Bank’s holdings of foreign exchange reserves remained adequate.



20/08/2009 Interest rates applicable to Bank of Jamaica’s open market instruments were reduced by 100 basis points. The revised schedule of rates is as follows:


This rate adjustment came against the background of a notable decline in inflation and continued stability in the foreign currency market. The twelve month point-to point rate of inflation as at July 2009 declined further to 7.0 per cent, from 8.9 per cent in June 2009.

Inflation expectations, measured by regular surveys of the business sector, continued to fall as input

costs had also stabilized over the past six months. This trend was expected to continue and, in conjunction with weak aggregate demand, should temper underlying inflation impulses.

17/09/2009 The rates offered on Certificates of Deposit issued by Bank of Jamaica were reduced by 100 basis

points. The six-month benchmark rate therefore moved from 18.00 per cent per annum to 17.00 per cent. The full schedule of BOJ rates is set out below.


The adjustment to policy rates followed the better than expected inflation outturn for August 2009,

which showed a further drop in the 12-month point-to-point inflation to 6.1 per cent from the 7.0 per cent reported for July. The stability of the exchange rate, the improvement in domestic agricultural supplies, and the moderate growth in domestic money supply, all point to the likelihood of single-digit inflation for fiscal year 2009/2010. The improved prospects for inflation and macroeconomic stability were reflected in market rates, with the downward trend in Treasury Bill yields and other short term rates. The easing of monetary policy was supported by the relatively strong position of the net international reserves of the Bank of Jamaica which stood at US$1.95 billion.

18/12/2009 Interest rates applicable to Bank of Jamaica’s open market instruments were reduced by 200 basis

points. The benchmark six-month rate will therefore move from 17 per cent per annum to 15 per cent. The full schedule of BOJ rates is set out below.

30 days 60 days 90 days 120 days 180 days New Rates (%)

10.50 11.00 13.50 13.70 15.00

Previous Rates (%) 12.50 13.00 15.50 15.70 17.00



The adjustment in interest rates occurred against the background of the positive trends in key economic indicators (inflation, the balance of payments and the exchange rate) which were expected to be sustained over the medium term. This outlook was underscored in the economic programme agreed with the Staff of the International Monetary Fund. The programme was underpinned by a package of policy measures geared towards fiscal and debt sustainability which was expected to lay the foundation for a stable macroeconomic environment and sustained growth.

06/01/2010 The Bank of Jamaica reduced the rate applicable to its open market overnight tenor by 50 basis points to 0.5 per cent.

12/01/2010 The Bank of Jamaica withdrew its offer of the 60-day to 180-day open market instruments. 15/01/2010 The Bank of Jamaica ceased accepting deposits under the special foreign currency deposit facility

related to the ‘Intermediation Facilities’ established on 12 November 2008. 09/02/2010 The rate payable on 30-day open market instruments offered by the Bank of Jamaica was reduced by

50 basis points: from 10.50 per cent per annum to 10.0 per cent per annum. The rates on the other tenor s remained unchanged.

The adjustment to the 30-day rate reflected the added boost to confidence that the IMF Board endorsement of a 27-month Stand-by Arrangement with Jamaica brought. On Monday, 8 February 2010, the Bank of Jamaica received half of the financial support approved by the Fund. As a result, the gross international reserves were approximately US$2.2 billion, representing approximately 16.9 weeks coverage of imports of goods and services. Additional foreign exchange inflows from other multilaterals were expected later in February. The receipt of these financial inflows was expected to provide the wherewithal for the Bank to underwrite continued stability in the foreign exchange market and would serve to reinforce the Bank’s expectation of reduced inflation in 2010.

01/03/2010 The cash reserve requirement (CRR) in respect of foreign currency prescribed liabilities of deposit-taking institutions was reduced by two (2) percentage points to 9.0 per cent. As a consequence, the liquid asset requirement was also reduced by two (2) percentage points to 23.0 per cent. The cash reserve and liquid asset requirements applicable to Jamaica Dollar liabilities remained unchanged.

The reduction in the CRR followed the receipt of loan flows from multilateral financial institutions in February. These inflows put the BOJ in an enhanced position to maintain stability in the foreign exchange market. The adjustment to the CRR, which returns the reserve requirements for foreign currency to the level that prevailed prior to December 2008, will allow deposit-taking institutions more latitude in the allocation of their foreign currency portfolios, including expanding credit to the business sector.

04/06/2010 The interest rate payable on Bank of Jamaica 30-day Certificate of Deposit was reduced by 50 basis points to 9.50 per cent. The adjustment occurred in the context of the abatement of inflationary impulses, particularly those related to the recent tax measures, and the moderation of the prices of key imported commodities, especially oil.



Secondary trading of securities as well as successive auctions of Treasury Bills indicated an endorsement of the new interest rate norms by the market. Additionally, the entrenchment of the lower interest rate structure was supported by the appreciation of the exchange rate and the reduction of sovereign credit risk as reflected in falling yields on internationally traded GOJ bonds.

Despite the interruption to economic activity in the Kingston Metropolitan Area during the week of 24

May, the Bank’s assessment of the outlook for growth in FY2010/11 remained largely unchanged. Some fall-out in tourism-related earnings was anticipated in the short run but the prospective reopening of a major alumina processing plant in June 2010 and the maintenance of business activity throughout most of Jamaica was expected to contribute to a modest recovery in GDP growth in the current fiscal year.

The Bank believes that current reforms embedded in the Government’s economic programme will lead

to lasting improvements in public finances and debt management and the creation of a basis for longer term financial stability.

17/06/2010 The rate payable on Bank of Jamaica 30-day Certificate of Deposit was reduced by 50 basis points to 9.00 per cent.

The adjustment in the rate followed a better-than-expected inflation outturn for the preceding month.

The fall in the general price level, together with the recent strengthening of the Jamaica Dollar, reinforced the likelihood that inflation would tend toward the lower end-point of the target range of 7.5 per cent to 9.5 per cent for fiscal year 2010/2011. Furthermore, the Bank’s net international reserves which stood at US$1.75 billion were expected to outperform the benchmark set under the current IMF Stand-By Arrangement for end-June 2010. These resources constituted a strong buffer against financial or weather-related shocks that might otherwise threaten the achievement of the macroeconomic objectives.

01/07/2010 The Bank of Jamaica reduced the Jamaica Dollar cash reserve requirements of its supervised deposit-

taking institutions by two percentage points (2%) to twelve per cent (12%). The cash reserve requirement applicable to foreign currency deposits which was reduced in March 2010 remains at nine per cent (9%).

The reduction in the domestic currency cash reserve requirements also resulted in a two percentage

point (2%) contraction in the liquid assets requirements against Jamaica Dollar liabilities to twenty-six per cent (26%). The liquid assets requirements against foreign currency liabilities remained at twenty-three per cent (23%).

Reserve requirements were increased in 2008/09 as part of the Bank’s response to the deterioration in

financial market conditions triggered by the global economic downturn. The Bank observed that those global market conditions were improving and domestic financial markets were stable. The release of the cash reserves increased the pool of loanable funds by some J$4.5 billion and allowed for a further easing in credit conditions.



These adjustments formed part of a general easing of monetary policy that was consistent with the improved outlook for inflation and the relatively weak demand conditions in the economy. The projected path for inflation for fiscal year 2010/2011 continued to trend towards the lower end of the target range of 7.5 per cent to 9.5 per cent.

04/08/2010 The Bank reduced the rate of interest payable on its 30-day Certificate of Deposit to 8.50 per cent from

9.00 per cent. The reduction in the Bank’s policy rate occurred against the background of the benign outlook for inflation. Money supply and bank credit expanded slower than expected during the first quarter of the fiscal year and kept domestic core or underlying inflation stable. Other contributing factors to local price stability were the sluggish recovery in global demand for commodities and the appreciation in the exchange rate since the start of the fiscal year.

Given the foregoing, the Bank expected that inflation outturn for FY2010/2011 would be toward the lower end of the 7.5 per cent – 9.5 per cent target range. The Bank contended that the main risk to this forecast was the disruption to supply that a hurricane or other severe weather conditions might cause.

26/08/2010 The Bank of Jamaica reduced its policy rate by a further 50 basis points to 8.0 per cent. This reduction in its 30-day Certificate of Deposit was accompanied by a 0.25 basis point contraction to 0.25 per cent, in the rate of interest payable on overnight placements of financial institutions held at the Bank.

The reduction in the policy rate was supported by the inflation outturn for July and the appreciation in

the Jamaica Dollar, both of which pointed to a more favourable outlook for domestic inflation for FY2010/2011. Furthermore, net international reserves which stood at US$1.9 billion would possibly outperform the benchmarks set under the current IMF Stand-By Arrangement. These resources constituted a strong buffer against financial or weather related shocks that might otherwise threaten the achievement of the macroeconomic targets.

15/11/2010 The interest rate payable on Bank of Jamaica 30-day Certificates of Deposit was reduced by 50 basis

points to 7.50 per cent. This revision to the Bank’s policy rate reflected the continued decline in inflation towards the

programme projections for the fiscal year and beyond. Risks to a reversal in this trend were abating as the hurricane season drew to a close while domestic demand conditions were weaker than earlier anticipated. Core, or underlying, inflation was also declining steadily.

The progress made in implementing fiscal and financial sector reforms led to repeated observance of performance benchmarks related to the economic programme for fiscal 201/2011. These successes continued to be reflected in financial market prices generally and in money market interest rates in particular. The change in the Bank’s policy rate endorsed the positive outlook for continued stability and the relatively benign prospects for inflation over the forthcoming year.


points to 7.25 per cent. This reduction in the Bank’s policy rate was consistent with the expectation that domestic inflation for FY2010/2011 would be within the programme projections of 7.5 to 9.5 per cent. It was expected that, while there was an increase in commodity prices worldwide, the relative weakness in domestic demand conditions and the extended stability in the exchange rate would dampen the prospect of an upturn in inflation.



The progress being made in implementing fiscal and financial sector reforms led to repeated observance of performance benchmarks related to the economic programme for this year. These successes continued to be reflected in financial market prices generally and in money market interest rates, in particular. The change in the Bank’s policy rate endorsed the positive outlook for continued stability.


points to 6.75 per cent.

This reduction in the Bank’s policy rate reflected the trend decline in inflation towards the programme projections for FY2010/2011 and the prospect of even lower headline inflation in FY2011/12. While international prices for agricultural commodities and oil had become more volatile, domestic demand conditions were weaker than earlier anticipated and had suppressed core, or underlying, inflation in the Jamaican economy. The reduction in the 30-day rate anticipated a period of very liquid conditions in the money market, arising from the payment of principal and interest on Government benchmark securities. At the same time, the Bank’s foreign reserves continued to perform above the benchmarks set in the financial programme and were on 23 February boosted by the proceeds from the Government’s recent US$400 million bond issue.

04/07/2011 Bank of Jamaica reduced the interest rate payable on its 30-day Certificates of Deposit by 25 basis points to 6.50 per cent. This revision to the Bank’s policy rate reflected the positive trends in headline and core inflation since the beginning of 2011 and the expectation that the rate of domestic price increases for fiscal year 2011/2012 would be within the BOJ’s target range of 6.0 per cent to 8.0 per cent. While there had been an increase in global commodity prices, the extended stability in the exchange rate and the relative weakness in domestic demand was expected to continue to dampen inflationary impulses.

Additionally, the process of fiscal consolidation had underpinned the continued stability in the economy. This stability was reflected in financial market prices and contributed to the buoyancy in the Bank’s net foreign reserves, which stood at US$2.3 billion.

30/09/2011 The interest rate payable on the Bank of Jamaica’s 30-day Certificates of Deposit was reduced by 25 basis points to 6.25 per cent. This revision to the Bank’s policy rate reflected the continued positive trends in headline and core inflation since the beginning of 2011and the projection that the rate of domestic price increases for the full fiscal year would be within the BOJ’s target range of 6.0 per cent to 8.0 per cent.

The more pessimistic outlook for growth in the global economy and the forecast for slower rates of increase in the prices of international commodities, particularly crude oil, had put a downward bias on domestic inflation for the rest of fiscal year 2011/2012. These moderating factors were complemented by the continuation of relative stability in the exchange rate and the persistence of weak but improving domestic demand. In addition, the process of fiscal consolidation continued to support the extended period of stability in the economy. This stability was reflected in financial market prices and contributed to the Bank’s gross international reserves remaining well above the international benchmark of 12 weeks of projected goods and services imports.


Appendices, C. Summary Tables 68

…

LIST OF SUMMARY TABLES

Table Page

1 Inflation Rates 69 2A Component Contribution to Inflation 70 2B Regional Inflation 71 3 Bank of Jamaica Operating Targets 72 4 Monetary Aggregates 72 5 Components and Sources of Change in Local Currency Money Supply 73 6A Commercial Banks’ Selected Interest Rates 74 6B GOJ Treasury Bill Yields 75 7 Bank of Jamaica Open Market Interest Rates 76 8 Jamaica: Government Bond Market GOJ Domestic Market Issues 77

9 External Trade - Goods Exports (f.o.b.) 78 10 Balance of Payments Summary 79 11 Foreign Exchange Selling Rates 80 12 Bank of Jamaica: Net International Reserves 81 13 Jamaica Stock Exchange Activities 82 14 Public Sector Domestic Securities 83 15 Production of Selected Commodities 84 16A Quarterly GDP: Value Added by Industry (seasonally unadjusted) 85

16B Quarterly GDP: Value Added by Industry (seasonally adjusted) 85 D. Bank of Jamaica Balance Sheet 86

E. Commercial Banks’ Balance Sheet 87 F.1 International Indicators:- London Interbank Offer Rate – LIBOR 88 2 London Money Rates-Interbank Sterling 89 3 Prime Lending Rates 90

4A International Exchange Rate US$ vs Other Major Currencies 91 4B International Exchange Rates Exchange Cross Rates 91

4C International Exchange Rates Sterling vs Other Major Currencies 91 5A World Commodity Prices- Key Crude Oil Price 92 5B World Commodity Prices- Food 92 6 Major Stock Market Indices 92



C. Summary Tables 1

INFLATION RATES (%)

CPI Index

(e.o.p) Head-line (Quarter)

Core (Trimmed-Mean) (Quarter)

2004/2005

June 76.8 1.9 1.1

September 79.0 2.9 2.3

December 84.1 6.4 2.6

March 85.3 1.5 0.7

2005/2006

June 90.0 5.5 2.1


December 94.6 0.9 0.6

March 94.9 0.2 0.9

2006/2007

June 97.6 2.9 1.3


December 100.0 0.1 0.2

March 102.5 2.5 1.9

2007/2008

June 105.1 2.5 1.3

September 108.9 3.6 1.9

December 116.8 7.3 4.0

March 122.9 5.2 3.5

2008/2009

June 130.3 6.0 3.4

September 136.5 4.7 2.0

December 136.5 0.0 1.1

March 138.2 1.3 1.1

2009/2010

June 142.0 2.7 1.3 September 146.3 3.1 1.5 December 150.4 2.8 1.4 March 156.6 4.1 1.8 2010/2011 June 160.7 2.6 1.1 September 162.8 1.3 0.8 December 168.1 3.3 1.6 March 168.9 0.5 0.5 2011/2012 June 172.3 2.0 1.1 September 175.9 2.1 1.1 December 178.2 1.3 1.0 March 181.2 1.7 1.0 2012/2013 June 183.9 1.5 1.0



2A

COMPONENT CONTRIBUTION TO INFLATION All Jamaica

April – June 2012

Divisions, Classes and Groups Weight in CPI Inflation

(%) Weighted Inflation

Contribution

(%)

FOOD & NON-ALCOHOLIC BEVERAGES 0.3746 2.98 1.11 80.42

Food 0.3512 3.07 1.08 77.72 - Bread and Cereals 0.0610 1.41 0.09 6.20 - Meat 0.0766 1.97 0.15 10.88 - Fish and Seafood 0.0533 4.17 0.22 16.03 - Milk, Cheese and Eggs 0.0311 8.76 0.27 19.66 - Oils and Fats 0.0164 1.64 0.03 1.95 - Fruit 0.0114 5.55 0.06 4.57 - Vegetables and Starchy Foods 0.0686 3.05 0.21 15.07 - Sugar, Jam, Honey, Chocolate and Confectionery 0.0172 2.12 0.04 2.64 - Food Products n.e.c. 0.0155 1.81 0.03 2.02 Non-Alcoholic Beverages 0.0235 1.41 0.03 2.39 - Coffee, Tea and Cocoa 0.0066 1.84 0.01 0.88 - Mineral Waters, Soft Drinks, Fruit and Vegetable Juices 0.0169 1.23 0.02 1.50 ALCOHOLIC BEVERAGES AND TOBACCO 0.0138 1.22 0.02 1.21 CLOTHING AND FOOTWEAR 0.0333 2.36 0.08 5.68 Clothing 0.0212 2.10 0.04 3.21 Footwear 0.0122 2.76 0.03 2.43

HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 0.1276 -1.16 -0.15 -10.72

Rentals for Housing 0.0352 0.31 0.01 0.78

Maintenance and Repair of Dwelling 0.0080 2.09 0.02 1.20 Water Supply and Miscellaneous Services Related to the Dwelling 0.0132 1.40 0.02 1.33 Electricity, Gas and Other Fuels 0.0712 -2.68 -0.19 -13.80

FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTINE HOUSEHOLD MAINTENANCE

0.0493 1.98 0.10 7.04

Furniture and Furnishings 0.0069 3.30 0.02 1.64 Household Textiles 0.0032 1.37 0.00 0.32

Household Appliances 0.0056 4.16 0.02 1.68 Glassware, Tableware and Household Utensils 0.0005 1.84 0.00 0.07 Tools and Equipment for House and Garden 0.0015 0.63 0.00 0.07

Goods and Services for Routine Household Maintenance 0.0316 1.39 0.04 3.16

HEALTH 0.0329 0.98 0.03 2.32

Medical Products, Appliances and Equipment 0.0122 0.95 0.01 0.84

Health Services 0.0207 0.99 0.02 1.48 TRANSPORT 0.1282 -0.16 -0.02 -1.50 COMMUNICATION 0.0399 0.00 0.00 0.00

RECREATION AND CULTURE 0.0336 2.19 0.07 5.30

EDUCATION 0.0214 0.35 0.01 0.54

RESTAURANTS & ACCOMMODATION SERVICES 0.0619 1.03 0.06 4.61

MISCELLANEOUS GOODS AND SERVICES 0.0837 0.84 0.07 5.09

ALL DIVISIONS 1.0000 1.47 1.39 100.00



2B

REGIONAL INFLATION April – June 2012

Divisions, Classes and Groups GKMA Other Urban

Centres

Rural Areas

FOOD & NON-ALCOHOLIC BEVERAGES 4.06 2.63 2.35

Food 4.17 2.68 2.45 - Bread and Cereals 2.01 1.63 1.01 - Meat 2.21 2.89 1.43 - Fish and Seafood 3.61 5.28 4.08 - Milk, Cheese and Eggs 7.80 7.04 10.27 - Oils and Fats 2.07 2.19 1.20 - Fruit 7.36 5.12 1.42 - Vegetables and Starchy Foods 6.71 -0.28 1.54 - Sugar, Jam, Honey, Chocolate and Confectionery 1.47 3.90 1.85 - Food Products n.e.c. 4.54 1.16 0.24 Non-Alcoholic Beverages 2.10 2.00 0.65 - Coffee, Tea and Cocoa 1.78 2.54 1.61 - Mineral Waters, Soft Drinks, Fruit and Vegetable Juices 2.22 1.82 0.18 ALCOHOLIC BEVERAGES AND TOBACCO 1.24 1.85 0.98 CLOTHING AND FOOTWEAR 2.98 3.44 1.61 Clothing 3.11 3.53 1.02

Footwear 2.82 3.28 2.56

HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS -0.76 -1.12 -1.63

Rentals for Housing 0.47 0.10 0.02 Maintenance and Repair of Dwelling 2.92 2.28 1.47 Water Supply and Miscellaneous Services Related to the Dwelling 1.40 1.40 1.40

Electricity, Gas and Other Fuels -2.88 -2.63 -2.58

FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTINE HOUSEHOLD MAINTENANCE

2.05 2.85 1.51

Furniture and Furnishings 2.05 4.26 3.87

Household Textiles 1.55 3.25 0.23 Household Appliances 0.62 6.52 6.25 Glassware, Tableware and Household Utensils 2.35 2.24 2.13

Tools and Equipment for House and Garden 1.78 2.15 0.33

Goods and Services for Routine Household Maintenance 2.35 1.91 0.24

HEALTH 0.82 0.97 1.07

Medical Products, Appliances and Equipment 0.78 1.10 1.00 Health Services 0.84 0.89 1.11 TRANSPORT -0.24 -0.08 -0.15

COMMUNICATION 0.00 0.00 0.00

RECREATION AND CULTURE 0.88 2.24 3.09

EDUCATION 0.00 0.66 0.65

RESTAURANTS & ACCOMMODATION SERVICES 0.31 1.39 1.91

MISCELLANEOUS GOODS AND SERVICES 0.95 1.40 0.49

ALL DIVISIONS 1.81 1.43 1.23



3

4

BANK OF JAMAICA OPERATING TARGETS

Dec-10 Mar-11 Jun-11 Sep-11

Dec-11 Mar-12 Jun-12

Net International Reserves (US$MN) 2 171.41 2 553.2 2 267.1 2 087.6 1 966.1 1 777.1 1 540.4

Net International Reserves ($JMN) 194 015.5 228 124.8 202 567.5 185 898.9 175 671.9 158 786.6 137 636.5- Assets 266 188.8 306 888.7 282 055.4 263 507.4 252 004.5 235 788.4 213 111.4

- Liabilities -72 173.4 -78 763.8 -79 487.9 -77 608.5 -76 332.6 -77 001.8 -75 474.8 Net Domestic Assets -108 922.5 -149 205.7 - 122 007.0 - 105 419.5 -83 961.8 -75 089.9 -53 299.1 -Net Claims on the Public Sector 101 374.0 75 721.2 94 900.4 97 214.7 96 540.4 118 844.8 108 245.1 - Net Credit to Banks -13 844.2 -13 934.0 -14 053..5 -13 886.9 -14 167.6 -15 188.5 --15 843.5 - Open Market Operations -129 180.1 -143 694.0 -135 415.3 -121 500.5 -98 899.8 -111 572.0 -78 348.6 - Other -67 272.2 -67 298.9 -67 438.6 -67 246.9 -67 434.9 -67 174.2 -67 352.1 Monetary Base 85 093.0 78 919.2 80 560.5 80 479.4 91 710.1 83 696.7 84 337.4

- Currency Issue * 56 710.7 50 310.4 50 886.8 50 892.7 62 646.7 53 655.1 54 023.3 - Cash Reserve 27 713.5 27 494.5 28 913.6 29 374.5 28 822.7 29 847.4 30 180.5 - Current Account 668.8 1 114.3 760.1 212.2 240.7 194.2 133.6

% Change Monetary Base (F-Y-T-D) 10.0 2.1 2.1 2.0 16.2 6.1 0.8 * Excludes BOJ’s teller cash; p: preliminary

MONETARY AGGREGATES (End-of-Period)

(J$MN)

M1J M1* M2J M2* M3J M3*

2008/2009 December 91 017.9 100 097.1 210 962.0 313 194.9 279 396.0 381 628.9 March 85 515.2 96 779.2 202 838.0 317 676.1 275 187.2 390 025.3

2009/2010 June 88 256.7 98 380.5 206 295.9 319 337.5 282 473.0 395 514.7 September 87 911.6 97 379.0 206 828.6 316 834.7 287 586.8 397 593.0 December 97 733.4 107 958.9 216 803.4 332 151.2 301 336.5 416 684.3 March 89 918.9 101 450.8 210 444.8 327 227.5 295 316.8 412 099.6 2010/2011 June 93 074.2 102 810.4 218 702.2 331 549.5 306 741.3 419 588.6 September 95 445.0 104 817.7 221 386.8 328 598.3 311 289.0 418 502.4 December 103 252.1 112 234.4 230 232.1 337 664.4 321 728.8 429 161.1 March 97 448.7 106 887.0 225 682.0 332 828.2 319 837.1 426 983.3 2010/2011 June 102 219.9 111 089.4 232 910.8 341 652.1 329 909.5 438 650.9 September December

97 967.0 112 757.2

105 551.6 120 569.9

227 561.9 245 020.0

332 330.1 351 418.5

325 013.2 355 367.8

429 781.5 461 766.3

March 2011/2012 June

103 826.7

104 618.5

112 954.1 115 166.2

236 177.3

236 749.5

349 882.9

348 997.1

348 302.0

338 546.6

462 007.6

450 794.1



5

COMPONENTS OF CHANGE IN LOCAL CURRENCY MONEY SUPPLY (Quarterly Flows - J$MN)

Sep-10 Dec-10

Mar-11r Jun-11p Sep-11p Dec-11 Mar-12 Jun-12p

M2J 2 684.8 8 845.3 - 4 550.1 7 228.8 -5 348.8

17 458.1

-8 842.7 572.2

Currency -81.9 8 079.8 -5 065.5 945.4 364.4 8 132.9

-5 415.1 366.6

Demand Deposits 2 452.7 -272.7 -737.9 3 825.8 -4 617.3 6 657.3 3 515.4 425.3 Savings Deposits 716.0 887.2 314.7 2 117.4 -728.2 2 806.8 349.8 40.0 Time Deposits -402.0 151.0 938.6 340.2 -367.7 -138.9 -262.0 -259.6

OTHER DEPOSITS 1 864.9 1 592.6 2 658.4 2 843.7

452.6 12 896.5 1 776.9 -10,327.6

TOTAL (M3J) 4 549.7 10 437.9 - 1 891.7 10 072.4

-4 896.2 30 354.6 7 065.9 -9,755.4

SOURCES OF CHANGE IN LOCAL CURRENCY MONEY SUPPLY

N.I.R. of B.O.J. 15 896.3 17 668.0 34 109.5 -25 557.4

-16 668.6 -13 031.2 -14 081.1 -21,150.0

M&LTFL of B.O.J 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Banking System Credit 17 500.3 -14 742.2 -35 616.4 14 581.3

-8 204.6 19 753.8 18 890.4 2,466.7

Public Sector 12 951.6 -14 711.4 -37 780.1 13 842.0

-15 023.7 12 355.9 12 377.7 -10,260.4

Private Sector 4 548.7 -30.8 2 163.7 739.3

6 819.1 7 397.9 6 512.7 12,727.1

Open Market Operations -25 495.4 7 026.2 -14 513.9 8 278.6

13 914.9 22 600.7 -12 672.2 33,223.3

Other -3 351.5 485.9 14 129.1 12 769.9

6 062.1 1 031.3 797.0 -24,295.5

TOTAL 4 549.7 10 437.9 - 1 891.7 10 072.4

-4 896.2 30 354.6 -7 065.9 -9,755.4 Memo:

Foreign Currency Deposits (Private Sector) -5 635.8 220.8 -286.1 1 595.2 -3 973.2 1 630.3 7 307.1 7 307.1

Foreign Currency Loans (Private Sector) -2 389.7

-126.8 -2 100.8 1 573.4 -2 411.1 6 546.7 2 906.6 2 906.6

p- p-preliminary

r -revised



6A

COMMERCIAL BANKS’ SELECTED INTEREST RATES (%) (End-of-Period)

Fixed Deposits * Savings Deposits

(Average) r Lending Rate

(Average)

Fixed Deposits Rate Loan Rate

Inter-bank Lending Rate

3-6 months 6-12 months (Weighted Average) (Weighted Average) (Average)

2003/2004 June 8.50–13.15 8.50-13.15 8.22 25.18 8.98 19.23 38.40 September 8.50-13.25 8.50-13.50 8.43 25.60 9.02 19.87 17.01 December 8.50-13.25 8.50-13.50 7.24 25.60 8.68. 19.32 24.08 March 8.50–13.25 8.50-13.50 6.78 25.40 8.47 19.01 17.16 2004/2005 June 8.50 – 13.25 8.50-13.50 6.61 25.02 8.15 17.75 15.75 September 8.50 - 13.25 8.50-13.50 6.61 24.95 7.99 17.76 8.38 December 3.00 – 14.10 3.50–14.30 6.48 24.89 7.78 17.72 12.95 March 3.00 – 14.10 3.50–14.30 6.36 24.89 7.54 17.35 12.58

2005/2006 June 3.00–14.10 3.50-14.30 5.52 24.70 7.34 16.43 10.00 September 2.50- 14.10 3.00–14.30 5.48 22.00 7.11 17.41 11.13 December 2.50- 14.10 3.00–14.30 5.48 22.00 7.00 17.32 12.42 March 2.50- 14.10 3.00–14.30 5.30 21.84 7.17 17.54 10.00 2006/2007 June 2.50- 14.10 3.00–14.30 5.39 22.50 7.17 17.60 9.00 September 2.50- 14.10 3.00–14.30 5.36 21.80 6.88 17.83 9.13 December 2.50- 14.10 3.00–14.30 5.20 21.90 6.60 17.59 8.10 March 2.50- 14.10 3.00–14.30 5.15 22.49 6.94 17.28 7.75 2007/2008 June 6.80 - 10.95 6.50 - 11.60 5.17 22.49 6.96 17.23. 9.67 September 6.80 - 11.85 6.50 – 12.35 4.88 21.08 6.85. 17.06 10.50 December 6.80 - 11.85 6.50 – 12.35 4.88 20.82 6.99 17.11 7.58 March 6.80 – 12..85 6.50 – 13.35 4.88 22.47 6.82 17.33 8.29 2008/2009 June 6.80 – 12..85 6.50 – 13.35 5.05 21.46 6.94. 16.97 11.67 September 7.30 - 12.85 7.00 – 13.35 5.54 23.18 7.03 16.46 8.67 December 7.30 - 12.85 7.00 – 13.35 5.33 23.17 7.37 16.78 24.50 March r 7.30 – 16.33 7.00 - 18.11 5.89 22.34 9.97 24.29 8.29 2009/2010 r June 7.30 – 18.20 7.00 – 19.00 5.87 23.32 9.85 24.35 8.07 September 7.30 – 15.49 7.00 – 15.75 5.86 22.26 9.44 24.19 7.39 December 6.75 – 12.86 7.55 – 13.52 5.35 21.62 9.22 23.45 8.64 March 5.35 – 9.82 5.00 – 9.98 4.09 21.51 7.37 22.66 6.57 2010/2011 r June 4.75 – 8.50 4.75 – 10.00 3.90 20.72 6.60 22.11 5.20 September 2.25 – 7.90 2.25 - 8.15 3.12 19.24 5.68 21.52. 5.25 December 2.25 – 7.90 2.25 – 7.70 2.47 18.95 4.89. 20.43 4.14 March 2.25 – 6.00 2.25- 6.75 2.34 18.52 4.52 20.33 3.70 2011/2012 June 2.25 – 6.00 2.25 – 6.50 2.24 17.98 4.20 20.10 3.43 September December March 2012/2013 June

2.25 – 5.72 2.25 – 5.72 2.25 – 6.40

2.00 – 5.25

2.25 – 6.25 2.25 – 6.00 2.00 – 6.75

2.00 – 6.00

2.27 2.13 2.10

2.10

18.54 18.30 18.12

17.46

4.12 4.16 5.84

5.92

18.34 18.03 17.70

17.36

3.29 3.34 3.73

4.95

*Relate to deposits of $100 000 and over. r: revised provisionally



6B

GOJ TREASURY BILL YIELDS (End of Period)

1-month 3-month 6-month 9-month 12-month

2002/2003 December 17.01 March 33.47 2003/04 June 28.46 September 23.42 23.87 December 22.05 March 15.23 15.57 2004/05 June 15.04 14.98 15.18 September 14.41 14.80 16.36 December 14.41 14.94 March 13.21 13.46 14.00 2005/2006 June 12.85 12.88 September 12.96 13.15 December 13.34 13.55 March 13.16 13.18 2006/2007 June 12.64 12.82 September 12.44 12.49 December 12.26 12.31 March 11.55 11.65 2007/2008 June 11.98 12.13 September 14.34 14.29 December 12.89 13.34 March 13.97 14.22 2008/2009 June 14.19 14.43 September 14.81 15.35 December 22.01 24.45 March 20.51 21.77 2009/2010 June 19.58 21.05 September 16.39 17.35 December 15.95 16.80 March 10.18 10.49 2010/2011 June 8.98 8.52 9.26 September 8.26 7.75 7.99 December 7.48 7.40 7.48 March 6.67 6.46 6.63 2011/2012 June 6.67 6.56 6.61 September December March 2012/2012 June

6.47 6.45 6.24

6.18

6.37 6.21 6.27

6.26

6.56 6.46 6.47

6.47



7

Note: Bank of Jamaica ceased accepting placements for 270-day tenors on 18 April 2006.

BANK OF JAMAICA OPEN MARKET INTEREST RATES

(End of Period)

Tenor of Instruments

End Period

30 days

60 days 90 days 120 days 180 days

270 days 365 days

2003/2004

June 15.00 15.30 20.00 24.00 26.50 29.50 30.00 September 15.00 15.30 18.00 21.00 23.50 23.75 24.00 December 15.00 15.30 17.00 20.00 21.00 22.00 23.00 March 14.85 15.00 15.10 15.50 16.00 16.95 17.95

2004/2005


2005/2006


2006/2007

June* 12.45 12.50 12.60 12.65 12.80 … … September 11.95 12.00 12.10 12.15 12.30 … … December 11.65 11.70 11.80 11.85 12.00 … … March 11.65 11.70 11.80 11.85 12.00 … …

2007/2008

June 11.65 11.70 11.80 11.85 12.00 … … September 11.65 11.70 11.80 11.85 12.00 … 14.00 December 11.65 11.70 11.80 11.85 12.00 … 13.46 March 13.50 13.70 13.90 14.00 14.20 … 15.00

2008/2009

June 14.00 14.20 14.40 14.50 14.70 … 15.50 September 14.00 14.20 14.40 14.50 14.70 … 15.50 December 17.00 17.50 20.00 20.20 21.50 … 24.00 March 17.00 17.50 20.00 20.20 21.50 … 24.00

2009/2010

June 17.00 17.50 20.00 20.20 21.50 … 22.67 September 12.50 13.00 15.50 15.70 17.00 … … December 10.50 11.00 13.50 13.70 15.00 … … March 10.00 … … … … … …

2010/2011 June 9.00 … … … … … … September 8.00 … … … … … … December 7.50 March 6.75 … … … … … …

2010/2011 June

6.75

…

…

…

…

…

…

September December March 2012/2013 June

6.25 6.25 6.25

6.25



8

JAMAICA: GOVERNMENT BOND MARKET GOJ Domestic Market Issues

April – June 2012 Amount raised

J$M Issue Date Stock Name Features

26 April VR BMI Note 2013A(re-opened) First issued 03 August 2011. Tenor of one year and four months. Fixed at 7.22% for the first three months, thereafter interest will be paid quarterly at a variable rate of 1.00 percentage points above the “Benchmark Rate”. First interest payment will become due and payable on 05 May 2012.

17 313.34

9 May VR BMI Note 2022 (re-opened) First issued 08 August 2011. Tenor of ten years and nine months. Fixed at 7.565% for the first three months, thereafter interest will be paid quarterly at a variable rate of 1.375 percentage point above the “Benchmark Rate”. First interest payment will become due and payable on 08 August 2012.

3 008.13

24 May FR 7.25% BMI Note 2015 Tenor of three years. First interest payment will become due and payable on 24 August 2012. Thereafter, interest will become due and payable quarterly, until maturity.

715.23

13 June VR BMI Note 2014 Tenor of two years. Fixed at 7.50% for the first three months, thereafter interest will be paid quarterly at a variable rate of 1.375 percentage points above the “Benchmark Rate”. First interest payment will become due and payable on 13 September 2012.

25 855.72

Notes: a/ Rate above Treasury is the relevant Treasury bill rate in effect at the beginning of the interest period. b/ The withholding tax of 25% on interest income has been in effect since May 1, 2000. c/ FR – Fixed Rate d VR-Variable Rate N.I.B. Non interest bearing Source: Debt Management Unit, Ministry of Finance & The Public Service



9

EXTERNAL TRADE – GOODS EXPORTS (f.o.b) (Flows - US$MN)

Bauxite Alumina Sugar Bananas

Other Non- Other Total

Traditional TraditionalGoods

Exports 2006/2007 115.2 1 083.7 90.4 13.3 79.1 631.5 188.5 2 201.7

June

29.4

258.8

43.0

3.2

25.0

144.8

46.0 550.2 September 29.4 268.7 2.6 3.8 20.1 166.0 44.2 534.8 December 27.0 265.2 0.0 3.4 14.8 161.4 47.2 519.0 March 29.4 291.0 44.8 2.9 19.2 159.3 51.1 597.7 2007/2008 r 112.7 1 213.7 104.9 6.4 83.8 797.1 225.3 2 543.9

June 28.5

315.3

42.4

4.5

21.8

173.3

47.6 633.4

September

28.3

267.7

13.1

1.9

22.6

155.7

54.5 543.8 December 26.7 320.0 0.0 0.0 21.2 162.3 57.6 587.8 Marchr 29.2 310.7 49.4 0.0 18.2 305.8 65.6 778.9 2008/2009r 105.5 1 039.3 92.6 0.0 82.6 727.5 267.2 2 314.7 June 29.6 366.9 43.0 0.0 24.9 251.6 80.4 796.4 September 28.8 304.1 11.8 0.0 25.6 253.4 77.8 701.5

December

26.9

248.8

0.0

0.0

11.9

128.8

50.8 467.2

March 20.2 119.5 37.8 0.0 20.2 93.7

58.2 349.6 2009/2010 95.7 334.5 57.8 0.0 90.8 578.8 248.6 1 406.2 June 14.4 81.6 26.7 0.0 26.7 153.3 55.9 358.6 September 23.9 84.5 7.8 0.0 26.0 168.8 60.3 371.3 Decemberr 26.9 82.4 0.0 0.0 17.5 114.7 66.7 308.2

March 30.5 86.0 23.3 0.0 20.6 142.0

65.7 368.1

2010/2011 133.1 446.7 47.9 0.0 76.6 448.2 269.2 1 421.7 June

31.6 83.6 13.3 0.0 22.4 109.5 59.4 319.8

September 37.0 87.1 7.7 0.0 22.4 110.7 64.6 329.5 December 29.6 146.0 0.0 0.0 13.5 101.0 63.7 353.8 Marchr

34.9 130.0’ 26.9 0.0 18.3 127.0 81.5 418.6

2011/2012 June r September r December r

J March

139.3 33.5 38.7 34.8 32.3

589.2 163.2 141.8 145.8 138.4

91.528.9

6.40.0

56.2

0.00.00.00.00.0

73.722.719.914.616.5

496.4 137.3 117.2 110.8 131.1

312.476.383.472.281.6

1 702.5461.9407.4378.2456.1

r-revised; p-preliminary



10

r: revised p: provisional

BALANCE OF PAYMENTS QUARTERLY SUMMARY (US$MN)

Sep-10r Dec-10r Mar-11r

Jun-11r Sep-11r Dec-11r Mar-12

1. Current Account -254.2 -418.3 -330.5 -483.9 -540.0 -690.5 -241.2A. Goods Balance -798.2 -963.0 -971.5 -980.4 -1 115.6 -1189.8 -940.6 Exports (f.o.b.) 329.5 353.8 418.6 461.9 407.4 378.2 456.1 Imports (f.o.b.) 1 127.7 1 313.6 1 390.1 1 442.4 1 523.0 1568.0 1396.7B. Services Balance 163.5 141.4 291.9 187.0 120.1 119.1 285.7 Transportation -111.1 -131.3 -108.7 -126.4 -156.6 -162.2 -136.8 Travel 410.1 410.6 561.7 455.1 415.1 421.8 590.0 Other Services -135.5 -138.0 -161.1 -141.7 -138.4 -140.4 -167.4Goods & Services Balance -634.6 -821.6 -679.7 -793.4 -995.5 -1070.7 -654.9C. Income -109.6 -137.7 -146.8 -197.6 -64.0 -139.9 -89.0 Compensation of Employees 30.2 46.3 3.0 4.8 14.8 26.1 12.1 Investment Income -139.8 -184.0 -149.7 -202.4 -78.9 -165.9 -101.0D. Current Transfers 490.0 541.0 496.0 507.1 519.5 520.0 502.6 General Government 44.2 62.3 35.3 28.0 32.6 25.4 26.6 Other Sectors 445.8 478.7 460.7 479.1 486.9 494.6 476.12. Capital & Financial Account 254.2 418.3 330.5 483.9 540.0 690.5 241.2A. Capital Account -6.1 -5.9 -2.6 -1.6 4.4 2.4 -5.7 Capital Transfers -6.1 -5.9 -2.6 -1.6 4.4 2.4 -5.7 General Government 0.2 0.0 4.6 5.4 10.7 8.3 1.5 Other Sectors -6.3 -5.9 -7.2 -7.0 -6.3 -5.9 -7.2 Acq./disp. Of non-produced non-fin. Assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0B. Financial Account 260.3 424.1 714.8 485.5 535.6 688.1 246.9 Official Investment 199.4 237.5 474.8 -346.5 177.8 185.8 232.8 Private Investment (including net errors & omissions) 238.8 384.4 240.0 545.9 171.2 387.8 -174.9

Reserves -177.9 -197.7 -381.8 286.1 186.5 114.5 189.0



11

FOREIGN EXCHANGE SELLING RATES

(J$ per unit of foreign currency-end of period)

US$ Can$ GB£ 2004/2005 September 61.89 49.05 111.62 December 61.63 50.66 117.92 March 61.54 50.61 115.35 2005/2006 June

61.84 50.52 110.52 September 62.89 53.61 110.02 December 64.58 54.95 110.40 March 65.50 56.14 112.94 2006/2007 June 66.03 59.50 120.19 September 66.06 59.10 123.48 December 67.15 57.53 131.53 March 67.80 58.75 132.40 2007/2008 June 68.58 64.81 136.60 September 70.41 70.38 142.28 December 70.62 71.39 140.32 March 71.09 69.75 141.15 2008/2009 June 71.89 71.49 142.55 September 72.68 69.49 130.35 December 80.47 65.54 116.84 March 88.82 71.97 129.02 2009/2010 June 89.07 76.84 148.08 September 89.08 82.76 142.16 December 89.60 84.57 143.55 March 89.51 88.06 135.07 2010/2011 June 86.02 82.26 128.58 September 86.25 83.84 135.87 December 85.86 85.34 133.74 March 85.75 88.14 137.28 2011/2012 June 85.91 88.61 137.77 September December March 2012/2013 June

86.30 86.60

87.30

88.70

83.31 84.20 87.65 86.71

134.69 134.44 139.28 138.66



12

BANK OF JAMAICA: NET INTERNATIONAL RESERVES (End-of-Period)

Gross ForeignAssets

(US$MN)

GrossForeign

Liabilities(US$MN)

InternationalReserves

(Net)(US$MN)

Weeks of Imports

Goods Goods & Services

2003/2004 September 1216.6 34.0 1182.6 19.0 12.8 December 1 196.3 31.4 1 164.9 18.3 12.5 March 1 596.9 28.2 1 568.7 25.0 16.6 2004/2005 June 1630.3 26.2 1604.1 22.5 15.3 September 1 640.7 24.2 1 616.5 23.5 16.0 December 1 881.9 23.4 1 858.5 27.5 18.7 March 1 924.1 22.5 1901.6 27.5 18.8 2005/2006 June 2 179.3 22.5 2 156.8 28.1 19.5 September 2 243.0 124.0 2 119.0 27.0 19.1 December 2 169.0 81.6 2 087.4 27.0 19.0 March 2 372.9 294.8 2 078.1 28.3 20.1 2006/2007 June 2 293.2 183.2 2 110.0 22.9 16.7 September 2 474.7 132.7 2 342.0 26.1 18.8 December 2 399.1 81.6 2 317.5 25.2 18.2 March 2 613.6 284.3 2 329.3 27.1 19.5 2007/2008 June 2 472.3 233.4 2 238.9 24.5 17.7 September 1 943.2 27.0 1 916.2 18.2 13.2 December 1 905.8 28.1 1 877.7 16.8 12.3 March 2 105.9 22.5 2 083.4 18.0 13.3 2008/2009 June 2 476.8 248.0 2 228.8 21.2 15.6 September 2 280.5 29.4 2 251.1 18.0 13.3 December 1 795.4 22.5 1 772.9 14.8 10.9 March 1 663.4 34.8 1 628.6 12.2 9.2 2009/2010 June 1 660.6 41.2 1 619.4 18.5 13.1 September 2 007.2 74.0 1 933.2 22.1 15.6 December 1 758.9 22.5 1 736.4 19.2 13.5 March 2 414.4 662.5 1 751.9 26.5 18.6 2010/2011 June 2 526.7 730.9 1 795.8 25.4 18.6 September 2 789.7 816.0 1 973.7 29.6 21.5 December 2 979.2 807.8 2 171.4 31.9 23.2 March 2011/2012 June September December March 2012/2013 June

3 434.7

3 156.7 2 949.2

2 820.42 638.9

2 385.1

881.5

889.6868.6854.3861.8

844.7

2 553.2

2 267.1 2 080.6

1 966.11 777.1

1540.4

37.2

28.527.825.523.2

20.9

26.7

21.4 20.7 19.2 17.5

15.8



13

JAMAICA STOCK EXCHANGE ACTIVITIES

Quarterly Values

Main Market Junior Market

JSE Market Index (End of Quarter)

Volume Traded (MN.)

Value of Stocks Traded ($MN.)

Junior Market Index

(End of Quarter)Volume Traded

(MN.) Value of Stocks Traded ($MN.)

2007/2008

June 90 069.9 352.4 2 762.0

September 96 299.8 884.7 5 013.4

December 107 968.0 640.3 13 609.5

March 107 439.3 678.2 9 817.1

2008/2009

June 109 754.0 1 117 .5 13 665.7

September 102 018.9 637.8 39 352.8

December 80 152.0 519.6 4 191.3

March 79 022.6 657.7 2 248.72009/2010 June 80 866.1 191.8 1 396.5 September 79 928.0 339.0 2 960.3 December 83 322.0 517.6 5 584.5 150.0 0.1 1.5 March 86 010.6 1 782.1 5 918.2 177.8 0.8 23.82010/2011 June 86 333.6 360.2 4 629.5 245.6 4.1 23.9 September 83 613.1 203.9 2 540.9 252.5 4.4 19.0 December 85 220.8 1 225.0 7 740.0 379.9 36.9 125.48 March 86 532.0 310.3 3 324.5 365.4 22.8 107.02011/2012 June 88 585.0 418.0 3 334.2

496.7 36.5 201.6

September 91 731.9 398.0 3 733.4 611.0 129.6 482.9 December 95 297.2 693.0 10 601.9 748.9 117.3 456.4 March 91 369.0 330.6 4 256.1 655.5 54.2 303.2 2012/2013 June 87 389.0 1 281.2 11 011.9 648.2 24.4 111.1 Note: Both volume and value reflect ordinary and block quarterly transactions; Trading on the Junior Market commenced in October 2009.



14

n.a.: Not Available

PUBLIC SECTOR DOMESTIC SECURITIES Outstanding Stocks

(J$MN)

End Period

Local Registered Stocks Treasury Bills

Bonds

GOJ

Benchmark Notes

BOJ Open Market Operations

Securities 2005/2006 June 220 529.2 4 050.0

231 749.8

167 485.1

September 220 059.0 3 800.0 244 195.7 168 108.2 December 225 762.8 3 500.0 240 934.0 149 806.5 March 235 632.7 3 800.0 233 643.7 157 357.6 2006/2007 June 236 668.6 4 200.0

249 662.1

159 438.0

September 231 237.9 4 600.0 285 901.2 166 018.9 December 229 978.3 4 700.0 294 773.2 154 757.0 March 226 631.1 4 200.0 276 155.1 165 704.0 20007/2008 June 232 363.8 4 200.0 297 276.0 150 758.3 September 226 746.9 4 200.0 315 256.5 129 771.5 December 224 228.4 4700.0 324 929.2 114 741.3 March 223 581.6 4 200.0 330 008.5 138 179.1 2008/2009 June 218 100.0 4 200.0 344 170.3 150 835.7 September 213 495.2 4 300.0 357 755.7 146 219.8 December 205 120.1 4 194.5 392 220.6 131 928.8 March 201 936.1 4 094.5 438 381.6 119 337.6 2009/2010 June 196 457.9 3 955.7 469 957.3 120 774.3 September 185 922.4 4 066.9 525 540.7 118 502.6 December 180 573.5 3 813.4 564 076.7 112 011.3 March 168.1 4 000.0 53 869.1. 695 389.9 121 349.2 2010/2011 June 4 400.0 33 068.2 731 602.4 110 710.8 September 4 400.0 31 547.2 750 423.9 136 206.2 December 4 000.0 31 116.4 760 285.9 129 180.1 March 4 000.0 29 981.8 769 759.3 143 694.0 2011/2012 June September December March 2012/2013 June

4 000.0 4 000.0 4 000.0 4 000.0

4 000.0

29 645.0 28 497.1 28 182.5 64 400.3

n.a.

792 017.9 831 394.5 846 266.4 839 483.3

n.a.

135 415.3 121 500.5 98 899.8 111 572.0

74 348.6



15

PRODUCTION OF SELECTED COMMODITIES ( Quarterly Flows- ‘000 tonnes)

Crude

Bauxite* Alumina Total Bauxite** Sugar

Bananas*** 2005/2006 4 099.7 4 048.7 14 167.4 151.0 18.8 June 916.0 1 061.8 3 508.3 51.6 4.5 September 1 022.3 1 013.7 3 544.5 0.0 3.6 December 1 035.9 957.4 3 442.6 5.4 3.5 March 1 125.5 1 015.8 3 672.0 94.0 7.22006/2007 4 594.3 4 105.2 14 905.5 144.0 30.5 June 1 136.3 1 053.4 3 779.2 46.3 6.9 September 1 186.5 1 003.9 3 724.6 0.0 9.4 December 1 099.7 1 026.5 3 675.2 2.3 8.4 March 1 171.8 1 021.4 3 726.5 95.4 5.82007/2008 4 386.2 3 897.8 14 523.0 156.9 11.7 June 1 089.7 1 044.3 3 775.3 59.7 8.1 September 1 123.1 908.9 3 489.6 6.9 3.6 December 1 033.3 966.4 3 597.2 9.4 0.0 March 1 140.1 978.2 3 660.9 80.9 0.02008/2009 3 916.7 3 856.3 13 614.4 139.4 0.0 June 1 020.4 1 153..9 3 794.4 54.8 0.0 September 1 115.0 980.5 3 6 18.7 4.2 0.0 December 1 043.0 1 011.8 3 622.5 0.2 0.0 March 738.3 710.1 2 575.2 80.2 0.0 2009/2010 3 465.3 1 513.5 7 347.5 133.9 0.0 June 546.2 471.0 1 698.6 42.9 0.0 September 883.6 337.8 1 765.4 2.4 0.0 December 1 032.2 353.9 1 968.0 4.9 0.0 March 1 003.3 350.8 1 915.5 83.7 0.02010/2011 4 630.0 1 738.3 9 226.3 123.1 0.0 June 1 109.4 332.9 2 047.8 30.9 0.0 September 1 220.2 447.0 2 367.3 2.5 0.0 December 985.8 460.7 2 208.9 4.1 0.0 March 1 314.6 497.7 2 602.3 85.6 0.0 2011/2012 June

4 970.5 1 240.5

1 926.3 476.5

9 960.5 2 438.5

149.647.9

0.00.0

September December March 2012/2013 June

1 346.81 228.51 154.7

1 175.9

482.9490.4476.5

427.6

2 580.42 549.42 392.2

2 290.5

2.07.7

92.0

31.9

0.00.00.0

0.0

* Crude Bauxite = Bauxite mined for export **Total Bauxite Exports = Crude bauxite + bauxite converted to alumina ***Banana Exports



16A VALUE ADDED BY INDUSTRY

AT CONSTANT (2007) PRICES (% CHANGE) March 2010 - March 2012 (Seasonally Unadjusted)

(Percentage Change (%) Over the Corresponding Quarter of Previous Year)

Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12

Total Value Added at Basic Prices -1.7 -2.5 -1.1 -0.7 1.5 1.9 0.3 1.5 -0.1 Agriculture, Forestry & Fishing 5.8 -5.8 3.9 -4.7 12.8 9.2 2.2 14.7 6.5 Mining & Quarrying -42.1 1.5 30.4 22.5 37.7 32.0 6.6 7.3 -5.0 Manufacturing -1.1 -3.8 -6.1 -4.3 0.3 -1.3 2.0 6.5 0.5 Food, Beverages & Tobacco -2.7 -2.2 1.3 0.3 3.6 5.1 2.0 0.8 1.9 Other Manufacturing 0.9 -5.9 -13.6 -8.6 -3.8 -9.3 2.0 12.4 -1.4 Construction & Installation -2.5 -2.5 -0.9 0.7 0.3 1.7 1.4 0.2 -5.6 Electricity & Water -1.2 -2.5 -5.8 -7.5 1.6 0.3 1.1 3.5 0.2 Wholesale & Retail Trade; Repairs; Installation Of Machinery

-4.4 -4.5 -3.9 -2.5 -0.3 0.6 0.8 1.1 0.9

Hotels and Restaurants 6.7 -1.1 2.3 5.6 4.2 2.3 -0.1 1.0 0.8 Transport, Storage & Communication 1.9 -3.8 -4.7 -3.9 -2.9 1.6 -3.5 -2.8 -3.1 Finance & Insurance Services -5.2 -5.5 -4.7 -2.1 -1.4 1.6 -1.0 -1.1 0.6 Real Estate & Business Services -0.8 -0.5 -1.0 -1.7 -0.6 -0.3 -0.5 -0.3 -0.2 Government Services 0.7 -0.7 -0.2 1.5 0.1 0.5 0.4 -0.6 -0.5 Other Services -1.0 -1.9 -0.4 -0.2 -0.4 -0.1 -1.5 0.0 0.0 Less Financial Intermediation Services Indirectly Measured (FISIM)

-9.3 -12.1 -15.8 -14.4 -4.3 -2.5 -3.6 -2.0 -2.2

Source: Statistical Institute of Jamaica 16B

VALUE ADDED BY INDUSTRY AT CONSTANT (2007) PRICES (% CHANGE) March 2010 - March 2012 (Seasonally Adjusted)

(Percentage Change (%) Over the Preceding Quarter) Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12

Total Value Added at Basic Prices -1.0 -0.2 1.9 -1.4 1.1 0.4 0.2 -0.2 -0.5 Agriculture, Forestry & Fishing -5.4 -4.0 13.7 -7.3 11.6 -6.6 5.7 4.4 3.1 Mining & Quarrying -1.0 -1.4 25.3 0.0 11.4 -5.5 1.3 0.6 -1.4 Manufacturing -3.7 -0.3 -0.8 0.1 1.1 -1.4 2.2 4.5 -4.4 Food, Beverages & Tobacco -2.8 -0.7 4.6 -0.8 0.8 1.1 0.4 -1.4 2.0 Other Manufacturing -4.6 0.1 -6.9 1.2 1.5 -4.5 4.5 11.8 -11.2 Construction & Installation -4.2 0.4 -0.6 -3.1 5.0 -0.9 0.2 -0.4 1.3 Electricity & Water 3.0 -1.7 -0.1 0.0 2.1 -0.5 -0.3 -1.2 -3.7 Wholesale & Retail Trade; Repairs; Installation Of Machinery

-2.0 -0.9 -0.3 0.7 0.3 -0.1 -0.2 1.2 0.0

Hotels and Restaurants 7.5 -2.4 -3.6 4.5 5.1 -2.5 -6.2 4.9 4.7 Transport, Storage & Communication 0.9 -2.8 -1.4 -1.3 2.9 1.4 -6.3 -0.8 2.9 Finance & Insurance Services -3.6 -0.1 0.5 0.4 -1.8 2.3 -1.7 0.0 0.2 Real Estate & Business Services -0.5 0.0 0.1 -1.1 0.5 0.2 -0.2 -0.8 0.6 Government Services -2.5 6.3 5.9 -7.5 -3.9 6.7 5.8 -8.4 -3.8 Other Services 0.0 -0.4 0.9 -0.7 -0.2 -0.2 -0.4 0.7 -0.1 Less Financial Intermediation Services Indirectly Measured (FISIM)

-5.8 -2.4 -4.0 -3.0 5.3 -0.6 -5.0 -1.5 6.5

Source: Statistical Institute of Jamaica



D. BANK OF JAMAICA BALANCE SHEET

ASSETS AND LIABILITIES (End of Period)

J$MN Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12

1. Assets 342 264.3 359 058.1 371 277.9 418 625.2 397 050.5 381 068.9 370 971.4 358 589.7 340 033.4

Foreign 216 097.1 239 430.3 255 506.6 294 268.0 270 373.4 254 162.9 243 924.7 230 191.6 210 509.5

Current Account & Foreign 31 550.9 50 097.4 19 357.2 16 675.5 17 852.7 15 971.4 36 168.5 35 430.2 23 536.6 Currency Balances

Time Deposits & Securities 142 367.6 147 199.3 194 189.1 235 874.2 210 100.8 195 984.4 165 795.2 152 873.7 145 839.2 Holdings of Special Drawing

Rights 29 198.1 13 143.7 28 763.0 28 460.0 29 096.0 28 790.7 28 527.5 28 291.2 27 363.8

Other 12 980.5 28 989.9 13 197.3 13 258.3 13 323.9 13 416.4 13 433.5 13 596.5 13 769.8

Local 126 167.2 119 627.8 115 771.3 124 357.2 126 677.2 126 906.0 127 046.7 128 398.1 129 523.9

Public Sector Securities 94 033.3 92 785.2 89 632.0 89 598.5 92 881.2 93 239.5 92 988.0 92 690.5 92 586.9

Discounts & Advances 9 446.9 3 578.6 2 294.7 0.0 0.0 0.0 0.0 0.0 0.0

Other Assets 22 687.0 23 264.0 23 844.6 34 758.7 33 796.0 33 666.5 34 058.6 35 707.6 36 937.1

Liabilities

342 264.3 359 058.1 371 277.9 418 625.2 397 050.5 381 068.9 370 971.4 358 589.7 340 033.4

Foreign

8 828.2 13 133.6 68 751.3 72 472.8 72 494.7

75 341.1

75 373.8

72 666.2

74 951.9

Local

339 067.2 345 924.5 302 526.8 346 152.4 324 555.8 305 727.9 295 597.6 282 923.5 265 081.6

Currency in Circulation

46 603.2 47 401.6 56 813.5 50 401.9 50 983.3 51 003.1 62 743.0 53 778.1 54 094.1

Deposits

248 953.6 260 295.8 207 032.0 245 113.5 221 698.6 206 283.2 185 545.3 179 503.9 159 115.3

Bankers

58 103.3 51 922.4 47 522.4 44 372.8 45 581.2 45 310.4 44 996.4 46 984.2 47 908.6

Government

21 185.7 6 136.8 6 059.8 13 683.1 24 532.1 20 189.8 8 774.2 10 117.1 23 159.5

Open Market Operations

110 710.8 136 206.2 129 180.1 143 694.0 135 415.3 121 500.5 98 899.7 111 572.0 78 348.6

Other

58 953.8 66 030.4 24 269.7 43 363.6 16 170.0 19 282.5 32 874.8 10 830.6 9 698.6

Allocation of Special Drawing Rights

35 155.3 35 155.3 35 155.3

35 155.3 36 280.4 36 280.4 36 280.4 36 280.4 35 362.5

Capital & Reserves

24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0

Other Reserves

8 331.1 9 073.2 9 990.6 11 370.5 12 945.7 13 333.6 12 844.9 12 970.5 12 832.1

Other Liabilities (Net)

-5 631.1 -6 025.4 -6 488.8 4 087.2 2 623.8 -1 196.5 -1 840.0 3 366.6 3 653.6



E. COMMERCIAL BANKS’ BALANCE SHEET

ASSETS AND LIABILITIES (End-of -period)

J$MN

Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12p

Assets 575 364.0 579 474.8 585 820.2 587 133.9 581 913.6 581 727.8 608 392.2

624 244.5

623 339.8Cash 6 044.8 6 898.9 8 234.0 6 899.2 6 530.2 6 171.7 9 792.9 6 216.4 6 218.0Balances with BOJ 88 926.4 92 596.2 97 328.7 107 811.5 99 324.4 93 457.6 81 915.2 94 140.1 75 655.3Foreign Assets 121 103.3 116 867.6 115 612.9 114 393.2 105 771.3 111 954.7 115 335.1 113 782.9 119 341.7Loans & Advances 249 855.6 252 195.0 251 361.0 248 924.3 253 372.9 253 683.1 266 044.2 277 204.9 287 928.9 Private Sector 218 683.5 220 947.9 221 222.3 221 238.4 223 545.6 228 897.2 243 206.9 251 915.9 262 438.3 Public Sector 31 172.1 31 247.1 30 138.7 27 685.9 29 827.3 24 785.9 22 837.3 25 289.0 25 490.6Public Sector Securities 65 798.5 67 581.2 69 400.0 64 174.9 69 850.0 69 667.4 82 529.7 79 374.5 78 958.1

Cheques in the Process of Collection 4 836.3 3 123.9 3 340.6 2 015.1 3 244.1 2 887.6 2 476.1 2 779.5 2 934.1Other Assets 38 799.1 40 212.0 40 543.0 42 915.7 43 820.7 43 905.7 50 298.9 50 746.2 52 303.8 Liabilities 575364.0 579 474.8 585 820.2 587 133.9 581 913.5 581 727.8 608 392.2 624 244.5 623 339.8Deposits

Local Currency Foreign Currency

373 667.1224 310.8149 356.3

372 891.6226 608.6146 283.0

379 094.1237 205.0141 889.1

382 636.7237 956.0144 680.7

383 679.1238 574.4145 104.7

387 584.8239 026.6148 558.2

400 120.1237 205.0141 889.1

409 844.6251 981.8157 862.8

422 961.3249 558.1173 403.2

Foreign Liabilities 65 985.8 64 469.3 62 870.4 56 148.3 56 464.8 53 882.0 54 771.1 54 016.4 46 543.1Discounts & Advances from BOJ 494.9 327.5 457.4 518.8 479.1 618.7 603.5 778 .7 632.0

Loans/Advances from Other Institutions 11 250.1 10 724.5 10 727.2 10 556.8 8 726.8 7 230.4 6 244.2 5 826.3 5 413.7

Cheques in the Process of Payment 4 198.5 3 441.6 3 082.5 4 995.5 3 546.5 3 583.9 3 044.8 3 065.3 3 143.8Other Liabilities 119 767.6 127 620.3 129 588.6 132 277.8 129 017.5 128 828.0 143 608.5 150 713.2 144 645.9 P - preliminary



F. INTERNATIONAL INDICATORS

1 USD LONDON INTERBANK OFFER RATE–LIBOR

(End- of-Period) 1 MONTH 3 MONTHS 6 MONTHS 12 MONTHS

2007/2008

June 5.3200 5.3600 5.3863 5.4256

September 5.5572 5.5424 5.3916 5.0865 December 4.6000 4.7025 4.5963 4.2238

March 2.7031 2.6881 2.6143 2.4862

2008/2009 June 2.4625 2.7831 3.1088 2.4862

December 0.4360 1.4250 1.7500 2.0040

March 0.5320 1.2670 1.8270 2.1170

2009/2010

June 0.3090 0.5950 1.1110 1.6060

September 0.2456 0.2869 0.6288 1.2638

December 0.2309 0.2506 0.4297 0.9844

March 0.2486 0.2915 0.4444 0.9200

2010/2011

June 0.3484 0.5339 0.7525 1.1731

September 0.2563 0.2900 0.4625 0.7778

December 0.2606 0.3028 0.4559 0.7809

March 0.2435 0.3030 0.4595 0.7825

2011/2012

September 0.2394 0.3743 0.5578 0.8649

December 0.2953 4.9075 0.8085 1.1281

March 0.2413 0.4682 0.7334 1.0485

2012/2013

June 0.2458 0.4606 0.7344 1.0680



2 LONDON MONEY RATES – INTERBANK STERLING

(End- of-Period) 1 MONTH 3 MONTHS 6 MONTHS 12 MONTHS

2008/2009 June 5 40/100- 5 51/100 5 86/100 - 5 95/100 6 5/100 – 6 17/100 6 36/100 – 6 45/100

September 5 90/100- 6 6 18/100- 6 28/100 6 25/100 – 6 35/100 6 35/100 – 6 45/100

December 2 5/100-2 5/100 2 68/100- 2 78/100 2 85/100 – 2 85/100 3 00/100 - 3 10/100 March 95/100 -1 05/100 1 60/100 – 1 70/100 1 85/100 - 1 95/100 2 06/100 – 2 16/100

2009/2010 June 34/100 - 64/100 1 14/100 - 1 14/100 1 38/100 - 1 48/100 1 69/100 - 1 79/100

September 35/100 - 50/100 35/100 - 55/100 50/100 - 77/100 85/100 - 1 25/100

December 40/100 - 50/100 47/100 - 57/100 76/100 - 86/100 1 20/100 - 1 30/100 March 37/100 - 54/100 45/100 - 64/100 70/100 - 87/100 1 10/100 - 1 31/100

2010/2011 June 45/100 - 55/100 60/100 - 70/100 92/100 - 1 2/100 1 36/100 - 1 46/100

September 45/100 - 55/100 62/100 - 72/100 94/100 - 1 4/100 1 38/100 - 1 48/100

December 43/100 - 53/100 61/100 - 71/100 94/100 - 1 4/100 1 38/100 - 1 48/100 March 47/100 – 57/100 67/100 – 77/100 1 03/100 – 1 13/100 1 50/100 – 1 60/100

2011/2012 September 60/100 - 68/100 88/100 – 96/100 1 18/100 – 1 26/100 1 67/100 – 1 75/100 December 58/100 - 66/100 97/100 – 1 05/100 1 34/100 – 1 42/100 1 85/100 – 1 93/100

March 59/100 - 67/100 96/100 - 1 04/100 1 34/100 - 1 42/100 1 85/100 - 1 93/100

2012/2013 June 50/100 - 58/100 81/100 - 89/100 1 12/100 - 1 21/100 1 64/100 - 1 72/100



3 PRIME LENDING RATES

(End- of-Period)

EURO-ZONE UNITED STATES UNITED

KINGDOM

Repo rate Fed Funds Rate Discount Rate Prime Rate Repo rate

2008/2009

June 4.00 2.00 2.25 5.00 5.00

September 4.25 2.00 2.25 5.00 5.00

December 2.50 0 – 0.25 0.50 3.61 2.00

March 1.50 0 – 0.25 0.50 3.25 0.50

2009/2010

June 1.00 0 – 0.25 0.50 3.25 0.50

September 1.00 0 – 0.25 0.50 3.25 0.50

December 1.00 0 – 0.25 0.50 3.25 0.50

March 1.00 0 – 0.25 0.75 3.25 0.50

2010/2011

June 1.00 0 – 0.25 0.75 3.25 0.50

September 1.00 0 – 0.25 0.75 3.25 0.50

December 1.00 0 – 0.25 0.75 3.25 0.50

2011/2012

September 1.50 0 – 0.25 0.75 3.25 0.50

December 1.00 0 – 0.25 0.75 3.25 0.50

March 1.00 0 - 0.25 0.75 3.25 0.50

2012/2013

June 1.00 0 - 0.25 0.75 3.25 0.50



4A INTERNATIONAL EXCHANGE RATES

Other Major Currencies vs. US$ (Currency/US$) (End- of-Period)

Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12

Sterling vs. US$ 0.6411 0.6232 0.6224 0.6401 0.6437 0.6256 0.6376 Canadian $ vs. US$ 0.9946 0.9718 0.9643 1.0389 1.0170 0.9991 1.0191

Yen vs. US$ 81.126 82.777 80.627 77.013 76.987 82.434 79.804

Euro vs. US$ 0.7468 0.7051 0.6885 0.7436 0.7709 0.7500 0.789

4B

INTERNATIONAL EXCHANGE RATES

EXCHANGE CROSS RATES (June 2012)

GBP CAN$ US$ Yen Euro

GBP 1.0000 1.5980 1.5684 125.17 1.2381

CAN$ 0.6256 1.0000 0.9813 78.3080 0.7746

US$ 0.6376 1.0191 1.0000 79.8040 0.7894

Yen 0.0080 0.0128 0.0125 1.0000 0.0099

Euro 0.8077 1.2910 1.2668 101.100 1.0000

4C

INTERNATIONAL EXCHANGE RATES Other Major Currencies vs. Sterling

(Currency/pound) (End- of-Period)

Jun-11 Sep-11 Dec-11 Mar-12 Jun-12

US$ vs. Sterling 1.6067 1.5623 1.5535 1.5984 1.5684

Canadian $ vs. Sterling 1.5493 1.6231 1.5799 1.597 1.5984

Yen vs. Sterling

129.54 120.32 119.6 131.77 125.17

Euro vs. Sterling

1.1062 1.1618 1.1975 1.1988 1.2381



5A WORLD COMMODITY PRICES

KEY CRUDE OIL PRICES (US$/barrel – f.o.b.) (End of Period)

Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12

North Sea Brent 77.79 91.80 114.44 111.38 106.26 108.68 124.86 97.55

West Texas Intermediate 75.55 89.23 102.98 96.29 85.61 98.83 103.02 84.96

5B

WORLD COMMODITY PRICES FOOD

(Period Averages)

Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Wheat (US$/mt, Hard Red Winter)

271.67 306.52 316.75 326.43 315.92 279.68 278.85 268.96

Coffee (USc/kg, Arabica brand) 490.99 547.00 643.87 606.23 597.37 536.18 486.95 400.35

6 MAJOR STOCK MARKET INDICES

(End- of-Period) Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12

TOKYO Nikkei Index 9382.64 9369.35 10228.92 9755.1 9816.09 8700.29 8455.35 10083.56 9006.78

NEW YORK

Dow Jones Industrials

9774.02 10788.05 11577.51 12319.73 12414.34 10913.38 12217.56 13212.04 12880.09

S & P Composite

1030.71 1141.20 1257.64 1325.83 1320.64 1131.42 1257.60 1408.47 1362.16

LONDON

Financial Times SE 100 4916.87 5548.62 5899.94 5908.76 5945.71 5128.48 5572.28 5768.45 5571.15

FRANKFURT

Dax Index 5965.52 6229.02 6914.19 7041.31 7376.24 5502.02 5898.35 6946.83 6416.28


Glossary 93

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). Bond Market: The domestic bond market primarily captures debt instruments offered by the Central Government to fund its budgetary needs. 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.

Glossary


Glossary 94

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. 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 month. 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 derived 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 to 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.


Glossary 95

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 Co mposite 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 In dex 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. 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.


Glossary 96

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. 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. 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.


Glossary 97

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 title to property, or claim on income e.g. bonds and stocks. Signal Rate: Interest rate on Bank of Jamaica’s thirty-day reverse repurchase agreements. This rate provides a benchmark for the pricing of all open market instruments negotiated between the BOJ and Primary Dealers. 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. Quasi-Fiscal Costs: The cost to the central bank of sterilizing the liquidity effects of capital inflows. Quasi-money: Savings Deposits plus Time Deposit.


List of Boxes 98

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

April - June 2001 7 Jamaica's Banking Sector Recovery - An Overview

Volume 2 No. 1 8 Jamaica's Sovereign Credit Ratings - An Update

9 Highlights of the IMF's May 2001 Article IV Consultation

July - Sept 2001 10 Innovations in Jamaica's Payment System

Volume 2 No.2 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:

Volume 2 No. 3 1997 - 2001

14 Tourism and the Jamaican Economy: Pre & Post 11 September 2001

15 World Trade Organization (WTO): Outcome of the Fourth Ministerial

List of Boxes in the Quarterly Monetary Policy Report


List of Boxes 99

Conference in Doha, Qatar and the possible Implications for Jamaica

Jan - Mar 2002 16 Commercial Bank Profitability (January to December 2001)

Volume 2 No. 4 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

April - June 2002 20 The Automated Clearing House: Implications for the Payment System

Volume 3 No. 1 21 Macroeconomic Implications of Cross Border Capital Flows: Some Scenarios

22 Performance of Remittances in the Latin American and Caribbean Region: 1997 - 2001

July - Sept 2002 23 Building Societies' New Mortgage Loans: July 2001 - June 2002

Volume 3 No. 2 24 An Overview of the CARICOM Single Market and Economy (CSME)

Oct - Dec 2002 25 The Profitability of the Banking System: 1991 - 2002

Volume 3 No. 3 26 Interest Rate Spreads in Jamaica: 1995 - 2002

27 Implications of the International Accounting Standards (IAS) for Financial Systems and Financial Stability

Jan - Mar 2002 28 Opportunities for Savings and Investments in Jamaica: Financial Intermediaries and Financial Instruments

Volume 3 No. 4 29 The CPI and the GDP Deflator: Concepts and Applications


List of Boxes 100

Apr - Jun 2003

30

The Concept and Measurement of External Competitiveness

Volume 4 No. 1 31 Exchange Rate Pass-Through in the Jamaican Economy.

July - Sept 2003 32 The International Investment Position

Volume 4 No. 2 33 The Fifth WTO Ministerial Conference: Implications for Future Trading Negotiations

Oct - Dec 2003 34 The Monetary Policy Committees: International Precedents and Macroeconomic Context

Volume 4 N0.3 35 Macroeconomic Determinants of Nominal Interest Rate

Jan - Mar 2004 36 Recent trends and Prospects in the Balance of Payments

Volume 4 No.4 37 The Exchange Rate Regime and Monetary Policy

Apr - Jun 2004 38 Preserving Financial Stability

Volume 5. No. 1 39 Financial Sector Assessment Programme

40 Jamaica's Current Relationship with the IMF

Jul -Sep 2004 41 Recent Developments in Crude Oil Prices

Volume 5 No.2 42 Implications of higher crude oil prices for the Balance of payments & Inflation

Oct - Dec 2004 43 Recent Trends in Foreign Direct Investments

Volume 5 No.3 44 Exploring the Jamaican Foreign Exchange Market Dynamics:


List of Boxes 101

2001 - 2004 (Special Feature)

Jan - Mar 2005 45 The BOJ Macroeconomic Stress Testing Programme and Financial Stability

Volume 5 No.4 46 Issues of Foreign Reserve Adequacy

Apr - Jun 2005 47 Credit Bureaux and Financial Market Efficiency

Volume 6 No.1 48 Trends in Labour Productivity

Jul - Sep 2005 49 Inflation in Selected Caribbean Countries

Volume 6 No.2 50 Special Feature: International Developments

Oct - Dec 2005 51 Payment Systems Reform

Volume 6 No.3

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

Volume 6 No.4

Apr - June 2006 53 Trends in Private Sector Credit: FY 2001/02 to FY2005/06

Volume 7 No.1 54 Exploring the Interest Rate Differential between Jamaica dollar and US dollar denominated assets: Jan 2001 - Jun 2006

55 Jamaica Labour Market: Trends and Key Indicators: 1996 - 2005


List of Boxes 102

July - Sept 2006 56 Labour Market Update - June 2006

Volume 7 No.2 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

Volume 7 N0. 3

Jan - Mar 2007 60 Jamaica's Financial Programme

Volume 7 No. 4 61 Inflation Expectation Survey

62 The Producer's Price Index

Apr - Jun 2007 63 Measuring Core Inflation: Emerging Issues

Volume 8 No. 1

Jul - Sept 2007 64 The Recent Turbulence in the US Subprime Mortgage Market

Volume 8 No.2 65 The Revised Consumer Price Index

Oct - Dec 2007 66 Trends in Jamaica's Fuel Demand

Volume 8 No. 3 67 Trends in Inflation

68 The EU-CARIFORUM Economic Partnership Agreement

Jan - Mar 2008 69 Impact of a potential USA recession on the Jamaican economy

Volume 8 No.4 70 Recent trends in international Commodity Prices


List of Boxes 103

Apr – Jun 2008 71 Global Monetary Policy Response to Spiralling Commodity Prices

Volume 9 No. 1

Jan – Mar 2009 72 BOJ’s Monetary Policy Response to the Global Financial Crisis

Volume 9 No. 4 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

Volume 10 No. 1

Jul – Sept 2009 76 Fiscal Responsibility Frameworks/Fiscal Rules

Volume 10 No. 2

Oct – Dec 2009 77

Bank of Jamaica Liquidity Support to Government

November 2009 – January 2010

Volume 10 No. 3 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?

Volume 10 No. 4 81 The Jamaica Debt Exchange


List of Boxes 104

Apr – Jun 2010 82 Exchange Rates and External Price Competitiveness

Volume 11 No. 1 83 Adequacy of BOJ’s Gross International Reserves

Jul – Sept 2010 83 Preserving Financial Stability (revisited)

Volume 11 No. 2 84 Credit Bureaux and the Efficiency of Credit Markets (updated)

Oct – Dec 2010 85 An Inflation Targeting Framework for Jamaica

Volume 11 No. 3

Jan – Mar 2011 86 The Middle East and North Africa (MENA) Crisis and its Implication for the Jamaican Economy

Volume 11 No. 4

Apr – Jun 2011

87 Evolution of the European Debt Crisis & Its Impact on Jamaica

Volume 12 No. 1

Jul – Sept 2011 88 Electronic Small-Value Retail Payments: Recent Trends and the Relationship with Economic Growth

Volume 12 No. 2

Oct – Dec 2011 89 Productivity and Growth

Volume 12 No. 3


List of Boxes 105

Jan – Mar 2012 90 External Competitiveness in Jamaica

Volume 12 No. 4

Apr – June 2012 91 The Importance of Managing Inflation Expectations

Volume 13 No. 1

Documents

April – June 2012 Volume 13 No. 1€¦ · Bank of Jamaica Quarterly Monetary Policy Report, April to June 2012 International Developments 2 Growth in the USA slowed during the June