After much anticipation, the Bank of Jamaica announced a slight reduction in its base interest rate.

The Central Bank announced on Tuesday that the policy rate will go from 7% to 6.75%, a decrease of 0.25 percentage points.

The BOJ began raising the rate in 2021 at the height of the COVID-19 pandemic and has held it at 7% for almost two years.

For months, several business leaders were calling for the BOJ to cut rates to help decrease the pressure on the economy. 

Speaking on Taking Stock with Kalilah Reynolds, Senior Trader at JMMB, Andre Reid said that the timing of the decrease is not a complete surprise.

“At the last announcement in June, the BOJ put the market on guard that they’re preparing themselves for a reduction. They did say that they would be relaxing the liquidity conditions in the market and they’ve started doing that,” he said.

Reid said he does not expect the BOJ to be very aggressive in reducing rates going forward.

“If they cut too fast and especially when you have the interest rate gap widening between us domestically and the international market, what’s going to happen is that the smart money will actually convert to US dollars and invest there,” he said.

“And that’s because if rates are higher on that side then you know that’s where you’ll find pressure on the foreign exchange market,” he explained.