Economic analysts have asserted that the Bank of Jamaica’s recent interest rate hike was the result of internal mismanagement. 

Speaking on Taking Stock with Kalilah Reynolds, Chairman of Jamaican Teas and QWI Investments, John Jackson said the drastic one percentage point move from 0.5% to 1.5% signalled to him that someone in the Central Bank made a huge blunder in the past as it relates to monetary policy.

Jackson, who had also criticised the Bank’s move to reduce the interest rate to the historic low of 0.5% back in 2019, said the Central Bank should have “been on the ball all along” to make granular upward adjustments to the rate. 

According to him, the main beneficiary to the low rate was the Government because their interest costs fell. 

“I frankly believe that the [tripling] move upward is ill advised,” he said before stating, “The one percent adjustment tells me that somebody slipped up badly in the past because you shouldn’t have had a need for a one percent jump all of a sudden.”

Chairman of Jamaican Teas and QWI Investments, John Jackson

Jackson argued that despite inflation just recently breaching the upper limit of the BOJ’s target range, smaller adjustments to the rate should have started earlier.

“We want a Central Bank that is going to be putting all the things into consideration. They are the ones telling us from time to time that inflation is going to go up before it’s supposed to go up so they should have those things already in the system to facilitate when they should move, or when things move closer to the top line then you make adjustments early enough,” he said.

Jackson said inflation will likely taper off this month with the foreign exchange rate appreciating in recent times. Pointing to statistics over the last three years, he reasoned that each time inflation spiked, the foreign exchange rate had moved, influencing the numbers.

Financial Coach, Founder and CEO of Profit Jumpstarter, Keisha Bailey, also agreed that such an aggressive move in the interest rate was shady, describing it as a ‘catch up’ measure for some previous shortfall.

“Typically we don’t see such drastic increases in interest rates being made. Something seems amiss to me as well because usually you have a more gradual increase in interest rates such that the economy and the market can absorb that increase,” she reasoned.

Bailey said she’s now anticipating how the move will play out in the economy, questioning if it will lead to lower prices and less domestic demand.

“That’s what we’re waiting to see. Is this increase going to affect consumers so that nobody wants to spend? Because we need the demand to keep the growth wheel turning in the economy,” she said. 

Equity Trader at JMMB Group,  Clive Charlton, who also viewed the rate hike as being heavy for the overall market, said he too will be watching to see how it affects the economy.

He also said a gradual movement would have kept the market relatively stable as financial institutions would have more time to adjust and filter that impact to the rest of the assets market.

“We’re facing a new paradigm…so we want to see now what this is going to do on the supply side, real productive side, financial side and also on consumer demand.”

As for Business Writer at the Jamaica Observer, David Rose, the increase could be as a result of the BOJ being privy to other concerning details not known to the public. He said that would explain the jump in the rate as such a move would otherwise not be expected from a Central Bank.

New episodes of Taking Stock with Kalilah Reynolds premiere Tuesdays at 8pm on YouTube and kalilahreynolds.com 

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