January March 2012 Volume 12 No. 4

January – March 2012

Volume 12 No. 4

Bank of Jamaica Quarterly Monetary Policy Report, January to March 2012

Bank of Jamaica

Quarterly Monetary

Policy Report

Jan – March 2012

Volume 12 No. 4



© 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.

mailto:[email protected]


CONTENTS Preface i

Overview iii 1. International Economic Developments 1

Box 1- External Competitiveness in Jamaica 8 2. Monetary Policy and Financial Markets

Money & Credit 14 Monetary Policy & Base Money Management 14

Money Supply 16 Private Sector Credit 19

Bond Market 22

Stock Market 25

Foreign Exchange Market 29

3. Real Sector Developments 31

4. Inflation 36

5. Economic Outlook and Monetary Policy Perspectives 41

Appendices

A. Fiscal Developments 48 B. Monetary Policy Developments 52 C. Summary Tables 71

Glossary 97 List of Boxes in the QMPR 102



i

PREFACE

The 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 an exposition of Jamaica’s External

Competitiveness (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

During the March 2012 quarter, the domestic economic

environment continued to be characterized by relatively

stable conditions. Inflation was in the Bank’s forecast

range, the foreign exchange market was generally stable

and the nascent recovery in economic activity continued.

However, there were uncertainties regarding the content

and timing of a new agreement with the IMF and the

impact of the upcoming fiscal budget as well as rising

international commodity prices. Against this background,

the Bank maintained its monetary policy rate at 6.25 per

cent for the review quarter.

Headline inflation for the March 2012 quarter was 1.7 per

cent. This outturn, which was within the Bank’s forecast

range of 1.0 per cent to 2.0 per cent, was primarily

influenced by higher international commodity prices and

moderate depreciation in the exchange rate. The impact of

these impulses was partially offset by reduction in the

prices of some domestic agricultural items due to

improvement in supplies as well as continued weak

domestic demand, albeit improving. For FY2011/12, the

inflation outturn was 7.3 per cent which was within the

target range of 6.0 per cent to 8.0 per cent.

The weighted average selling rate (WASR) of the US dollar

vis-à-vis the Jamaica Dollar, depreciated by 0.8 per cent in

the March 2012 quarter. Notwithstanding, the adequacy of

net private capital flows to finance the demand for current

account transactions for the quarter, there were intermittent

periods of excess demand for foreign currency. Against this

background, the Bank sold US$102.1 million (net) in the

market during the quarter. This contributed to a decline of

US$189.0 million in the net international reserves (NIR) to

US$1 777.1 million. The Bank’s gross reserves at end-


iv

March 2012 amounted to US$2 638.9 million, representing

17.0 weeks of projected goods and services imports.

Economic growth is estimated to be in the range of 0.0 per

cent to 1.0 per cent for the March 2012 quarter. This

followed average quarterly growth of 1.5 per cent for 2011.

The estimated growth for the review quarter was mainly

reflected in the following sectors: Agriculture, Forestry &

Fishing; Manufacture; Electricity & Water Supply and

Transport, Storage & Communication. Growth in the

economy was mirrored primarily in net external demand

which emanated from both an increase in exports and a

reduction in imports. Other components of aggregate

demand were estimated to have declined or remained flat in

the review period. For FY2011/12 economic activity is

estimated to have expanded within the range of 1.0 per cent

to 1.5 per cent in comparison to an average decline of 1.6

per cent over the previous two fiscal years. The outturn was

broadly in line with the projection for the fiscal year.

Primarily reflecting the weak domestic demand conditions,

albeit improving, broad Jamaica Dollar money supply

(M3J) declined by 2.0 per cent during the March 2012

quarter, a sharper contraction than the reduction for the

corresponding quarter of 2011. For FY2011/12, M3J grew

by 8.9 per cent and was below the average increase of 9.6

per cent for the last five fiscal years. The contraction for the

review quarter occurred in spite of a 3.9 per cent growth in

private sector credit, albeit at a slower rate than that

recorded for the preceding quarter. The increased demand

for private sector loans during the March 2012 quarter may

be reflective of the continued contraction in rates offered

on overall credit, with the weighted average rate of interest

on private sector credit falling by 35 bps.

The quality of private sector credit improved marginally

during the review quarter. In this regard, the ratio of non-


v

performing loans, three-months and over declined to 8.4

per cent from 8.8 per cent for the December 2011 quarter.

During the March 2012 quarter, market determined interest

rates exhibited mixed movements. While the average yield

on the GOJ 30-day Treasury bill declined over the quarter,

there were marginal increases on the longer tenors. Of note,

there was convergence in yield on the 90-day tenor towards

equivalent yield on the BOJ’s 30-day Certificate of Deposit

(CD).

Outlook

The general price level for domestic consumer goods and

services is forecasted to expand by 1.5 per cent to 2.5 per

cent during the June 2012 quarter, following an increase of

1.7 per cent for the March 2012 quarter. Inflation for the

quarter is expected to be influenced by a forecast for

relatively stable imported inflation, domestic inflation

expectations and capacity conditions. The forecast for

imported inflation assumes that, in spite of some volatility

in crude oil price intra-quarter, the overall movement

should not be significantly different from the average price

which prevailed in the previous quarter. In addition, the

output gap is expected to remain negative but improving

relative to the previous quarter thus providing minimal

impetus to price increases. There is the possibility of

additional inflationary impulses emanating from fiscal

measures, which would result in a higher inflation.

Domestic output is anticipated to expand marginally for the

June quarter, largely similar to the estimated growth in the

March quarter. The main growth sectors are expected to be

Agriculture, Forestry & Fishing, Mining & Quarrying, Hotels &

Restaurants and Electricity & Water Supply.


vi

For FY2012/13, headline inflation is currently forecasted to

be within the 6.0 per cent to 8.0 per cent range. The

anticipated rate of increase in the general price level partly

reflects expected general improvement in weather patterns

in the major grain producing countries. Inflation could also

be impacted by increased oil prices, given the improved

prospects for global growth and the continuing geopolitical

risks in some oil producing countries. However, inflation

could fall outside of the forecast range with the

implementation of measures to return the fiscal account to a

sustainable path.

Economic output for FY2012/13 is currently forecasted to

expand in the range of 0.0 per cent to 1.0 per cent. This

outlook reflects the expectation of continued weak

domestic demand, albeit improving relative to the crisis

period, coupled with a slower rate of expansion in global

growth in calendar year 2012 relative to 2011. Nonetheless,

the forecasted growth in the global economy is expected to

generate improved external demand for Jamaican goods

and services and acceleration in remittance flows to

Jamaica.

For FY2012/13 and beyond, strong and sustainable

improvement in domestic economic performance rests

critically on significant enhancement of the country’s

external competitiveness. This can be achieved through

adjustments to relative prices and the amelioration of

structural issues that impede competitiveness. Importantly,

attempts to address the issue of external competiveness

solely through adjustments to relative prices would be

inadequate.

Against this background, the Bank’s monetary policy

stance will continue to be supportive of the maintenance of

a stable macroeconomic environment within the context of

relatively stable financial markets and continued GOJ fiscal

consolidation.


vii


International Developments 1

Table 1.1

Selected GDP Growth Rates***

Sep-11 Dec-11 Mar-12

Advanced Economies

USA 1.8 3.0 2.2

Canada 4.2 1.8 2.1*

Japan 7.1 -0.7 0.0

UK 0.3 0.5 0.6*

Euro area 1.3 0.7 -0.3*

Emerging Market Economies

China 9.1 8.9 8.1

Russia 5.0 4.8 3.7*

Brazil 2.1 1.4 1.8*

Sources: Central Statistics Offices *Bloomberg Consensus Forecasts **BOJ Forecasts

***Quarter-over-Quarter percentage change at annual rates

Global economic growth is estimated to have decelerated during the

March 2012 quarter

The pace of global economic growth is estimated to have

slowed in the March 2012 quarter reflecting a slower pace of

growth in some advanced and emerging market economies.

With respect to the advanced economies, the deceleration

largely reflected an estimated contraction in the Euro area as

well as a reduced pace of growth in the USA. For emerging

markets, the slowdown was mainly reflected in China.

Jamaica’s terms of trade (TOT) is estimated to have improved

for the March quarter. This primarily emanated from an

estimated rise in export prices, the impact of which was partly

offset by an increase in import prices.

In the context of weak domestic economic activity, central

banks in most advanced economies kept their target interest

rates unchanged and provided necessary liquidity to alleviate

credit constraints in financial markets. The central banks of

some emerging market economies also employed expansionary

monetary policy measures to mitigate the effects of a weak

global environment.

Market interest rates for US dollar-denominated assets rose

during the review quarter, primarily driven by reduced

concerns about Greece and the impact of the European debt

crisis on international financial markets. Against this

background, emerging market bonds yields declined during the

quarter.

Global Economic Growth

The pace of global economic growth in the March 2012 quarter

is estimated to have decelerated relative to the previous

quarter. The slower pace of growth largely reflected an

estimated contraction in the economies in the Eurozone as well

as a reduced pace of economic growth in USA. This was

however, partly offset by a rebound in economic output of the

Japanese economy. Growth among emerging economies,

particularly China is also estimated to have slowed during the

quarter (see Table 1.1).

11.. IInntteerrnnaattiioonnaall DDeevveellooppmmeennttss



Table 1.2

Source: Central statistics offices * Bloomberg Consensus forecasts

Real GDP growth in the Euro area is estimated to have

contracted by 0.3 per cent in the March 2012 quarter following

a marginal expansion of 0.7 per cent in the preceding quarter.

This estimated contraction reflected the impact of the

implementation of fiscal austerity measures in some Euro area

countries affected by the sovereign debt crisis. In particular,

growth in Europe’s two largest economies, Germany and

France, is estimated to have decelerated to 0.8 per cent and 0.3

per cent, respectively, during the March quarter from 2.0 per

cent and 1.3 per cent in the December 2011 quarter.

For the USA, real GDP growth is estimated to have

decelerated to 2.2 per cent in the March 2012 quarter, relative

to a 3.0 per cent expansion in the December 2011 quarter. This

performance largely reflected an estimated reduction in net

export earnings stemming from a slowdown in global trade.

Similarly, investment expenditure declined during the quarter,

largely reflecting a deceleration in new home sales. The sale of

new homes, on an annualised basis, is estimated to have

moderated to 5.6 per cent from 11.7 per cent in the preceding

quarter. Growth in consumption expenditure, however,

accelerated reflecting more favourable labour market

conditions as well as an improvement in business and

consumer confidence during the quarter. The Japanese economy is estimated to have grown, on an

annualised basis, by 1.7 per cent in the March 2012 quarter,

following a contraction of 0.7 per cent in the previous quarter.

This rebound in growth reflected an improvement in the

manufacturing sector associated with increased domestic

demand influenced by reconstruction activities following the

natural disaster in 2011. Additionally, a 5.7 per cent

depreciation in the value of the Japanese Yen contributed to

the acceleration in export-led growth in that country.

With respect to emerging economies, real GDP for China

decelerated to 8.1 per cent in the March 2012 quarter, relative

to growth of 8.9 per cent in the previous quarter. This also

compares to average growth of 10.6 per cent in the previous

five March quarters. The deceleration in the rate of growth

Average Unemployment Rate for Selected Economies

Jun. 11 – Mar. 12

USA Canada Euro

area

Jun-11 9.0 7.5 10.0

Sept-11 9.1 7.3 10.2

Dec-11 8.7 7.5 10.5

Mar-12 8.3 7.4 10.7*



Employment in the USA improved in the March 2012 quarter.

Table 1.3

Source: Central statistics offices * BOJ forecasts

Global inflation decelerated during the quarter.

reflected the impact of a continued slowdown in the

manufacturing sector, influenced by weak global demand as

well as various monetary tightening measures implemented by

the Chinese authorities in previous quarters.

Unemployment

Changes in the unemployment rate for selected developed

economies were mixed for the review quarter. In the USA, the

average unemployment rate fell to 8.3 per cent for the March

2012 quarter, relative to 8.7 per cent in the preceding quarter

(see Table 1.2). This outturn was the lowest unemployment rate

recorded since March 2009 and primarily reflected a faster

decline in the number of unemployed persons relative to the

rate of increase in the labour force. Increased employment

during the quarter was evident in the manufacturing,

professional and business services as well as the leisure and

hospitality sectors. The unemployment rate in Canada also

declined marginally to an average rate of 7.4 per cent from 7.5

per cent in the December 2011 quarter.

The rate for the Euro area, however, is estimated to have

increased to 10.7 per cent from 10.5 per cent in the previous

quarter. This reflected the fourth consecutive quarter of

increase and is primarily associated with the implementation of

various fiscal austerity measures in some of the member

countries.

Inflation

Inflation for all major economies is estimated to have

decelerated during the review quarter (see Table 1.3). The

average twelve-month point-to-point inflation rates for the

March 2012 quarter for the UK, China, the USA, the Euro area

and Canada fell by 1.2, 0.8, 0.5, 0.2 and 0.2 percentage points,

respectively, when compared with the same measure in the

preceding quarter. The deceleration in inflation stemmed

primarily from a moderation in food prices as well as weak

domestic demand conditions relative to previous quarters.

Notwithstanding the overall deceleration in inflation in the

selected economies, the rate was adversely impacted by higher

commodity prices during the latter half of the quarter.

Annual Point-to-Point Inflation for Selected Economies (quarterly averages)

Jun. 11 – Mar. 12

USA Canada UK China

Euro

area

Jun-11 3.4 3.4 4.4 5.7 2.8

Sept-11 3.8 3.0 4.7 6.3 2.7

Dec-11 3.3 2.7 4.7 4.6 2.9

Mar-12 2.8 2.5* 3.5 3.8 2.7



Higher crude oil and agricultural commodity prices characterized

the March 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), increased by an estimated 3.7

per cent for the March 2012 quarter, relative to the December

2011 quarter (see Table 1.4).1 This compares to an average

increase of 14.1 per cent over the past five March quarters. On

an annual basis, the TOT however, declined by 5.7 per cent.

The improvement during the review quarter was attributed to

an 8.3 per cent rise in the Export Price Index (EPI), which was

partly tempered by a 4.4 per cent increase in the Import Price

Index (IPI).

The rise in the EPI emanated from an estimated 77.2 per cent

increase in sugar prices. This was associated with a change in

the contractual arrangements to a higher priced private investor

during the quarter. The performance of the IPI was

underpinned by higher fuel and agricultural raw materials

prices during the review period. Notably, average crude oil

prices as measured by the West Texas Intermediate

benchmark, rose by 9.4 per cent during the March 2012 quarter

to average US$102.94 per barrel. This compares to a five-year

seasonal average increase of 4.8 per cent. Higher fuel prices

largely stemmed from concerns regarding possible supply

disruptions due to the implementation of sanctions against Iran

and the threat of a closure of the Strait of Hormuz, the transit

point for approximately 20.0 per cent of global oil. Price

movements were also influenced by the impact of favourable

macroeconomic conditions in the USA and the approval of a

second Greek bailout package in the latter half of the quarter.

Higher agricultural raw material prices were underpinned by

reduced yields in South America reflecting the impact of

drought conditions in Argentina and Brazil since late

December 2011. Average soybean, corn and wheat prices

therefore rose by 6.0 per cent, 3.1 per cent and 1.4 per cent,

respectively, and contributed to a 1.1 per cent increase in the

Bank’s agricultural raw material sub-index for the quarter.

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)

Sept-11 Dec-11 Mar-12

TOT -2.8 -1.3 3.7

IPI -5.7 0.1 4.4

Crude Oil -12.5 4.8 9.4

Soybeans -1.4 -11.1 6.0

Corn -3.4 -10.9 3.1

Rice 14.8 5.9 -9.3

Wheat -8.6 -9.6 1.4

EPI -8.4 1.2 8.3

Sugar -8.0 0 77.2

Aluminium** -7.2 -13.3 5.0



Table 1.5

a Fed Funds rate b Repo rate c Discount rate d Benchmark lending 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

Monetary Policy

The central banks of the major advanced economies kept their

target interest rates unchanged during the March 2012 quarter

(see Table 1.5). This was in the context of an attempt to

stimulate growth in economies which have been affected by

weak demand impulses emanating from the impact of the

European debt crisis. The European Central Bank (ECB)

employed its second round Longer-Term Refinancing

Operation (LTRO) through the allotment of €529.5 billion to

800 banks. This was in an effort to enhance liquidity

conditions in the Euro Area. The Federal Reserve also

continued its monetary policy measures of selling short-term

securities and purchasing longer-term securities with a view to

reducing long-term borrowing costs.

While the central banks of most emerging economies kept their

target rates unchanged, various expansionary monetary policy

measures were, however, implemented 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 bps. This was in an effort to inject

additional liquidity into the financial system of that country.

The central bank of India reduced the cash reserve requirement

ratio by 25 bps to address the structural pressures on liquidity

while the central bank of Brazil lowered its Selic rate by 125

bps to 9.75 per cent as a means of mitigating the effects of a

restrictive global environment (see Table 1.6).

Selected Interest Rates

Over the quarter, the average yield on secondary market trades

for US Treasury bills rose, relative to the average of the

preceding quarter. This outturn largely reflected higher yields

unchanged at 1.79 per cent, relative to the preceding quarter

(see Figure 1.1). The movement in average yields partially

reflected the success of the Fed’s Operation Twist which was

on the short term bonds, which rose by 5 bps to average 0.1 per

cent. The average yield on long-term bonds was however

implemented in the September 2011 quarter, as well as

Selected Benchmark Interest Rates: Advanced Economies

Dec. 11 – Mar. 12

USAa UKb Euro areab

Japanc Canadad

Dec. 0 - 0.25 0.50 1.00 0.10 1.00

Jan. 0 - 0.25 0.50 1.00 0.10 1.00

Feb. 0 - 0.25 0.50 1.00 0.10 1.00

Mar. 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

Dec. 6.56 8.00 8.50 11.00

Jan. 6.56 8.00 8.50 10.50

Feb. 6.56 8.00 8.50 10.50

Mar. 6.56 8.00 8.50 9.75



Figure 1.1 US Treasury Yield Curve

Table 1.7

Source: British Bankers’ Association

improvements in the US labour and equity markets. This

resulted in reduced demand for the relative safety of

Treasuries, particularly in the short-term.

Credit risk in US financial markets declined during the review

period. The average spread between the 3-month USD LIBOR

and the 3-month US Treasury bill (TED spread), an indicator

of this risk, fell by 2 bps, relative to the previous quarter, to

average 44.5 bps (see Table 1.7). This decline reflected

reduced concerns about the instability in the financial markets

and an upward revision to the pace of global economic growth,

particularly in the context of the approval of the second bailout

package for Greece during the quarter.

Emerging Market Bonds

The average yield on the EMBI+ declined by 28 bps to 5.54

per cent during the quarter. As a result, the spread between the

EMBI+ and US Treasury bond yields (USTB) narrowed by 30

bps during the review period. Notwithstanding, the spread

between GOJ global bond yields and the USTB yields widened

by 4 bps to 5.56 per cent during the March 2012 quarter

reflecting the impact of domestic factors on investors’

perceptions.2

Equities

Selected stock market indices rose during the review period. In

the USA, the Dow Jones Industrial Average (DJIA) and the

Standard & Poor’s 500 index(S&P 500) rose by 8.0 per cent

and 12.0 per cent, respectively, during the quarter.

The rise in the indices reflected increased investor preference

for equities during the quarter against the background of

improved macro-economic conditions, particularly in the

labour market. The FTSE 100 Index, UK’s main index, also

2The GOJGB composite bond index is calculated as a weighted average of the

yields on currently outstanding Government of Jamaica global bonds. The weights

used, are based on Basis Point Value (BPV) estimates, a derivative of duration

statistics. BPV quantifies the interest rate risk in a portfolio for small changes in

interest rates.

Selected Market Interest Rates

(period averages)

3-month USD

LIBOR

3-month US

Treasury Bill

TED Spread

(bps)

Jun-11 0.26 0.05 21.7

Sep-11 0.30 0.02 27.4

Dec-11 0.48 0.01 46.6

Mar-12 0.51 0.07 44.5



Figure 1.2 Selected Stock Market Indices

increased by 3.5 per cent against the background of the

approval of the second bailout package for Greece as well as

monetary policy initiatives employed by the ECB during the

quarter. Japan’s main index, the Nikkei 225, also rose by 19.3 per cent as the depreciation in the Yen and increased demand

for Japanese exports heightened growth prospects in that

country (see Figure 1.2).

Foreign Exchange Market

The US dollar strengthened against some major currencies

during the review period. Notably, the Euro and the Yen

depreciated by 2.6 per cent and 2.4 per cent, respectively,

reflecting the impact of financial market instability,

particularly during the first half of the quarter. The Great

British Pound was unchanged relative to the previous quarter.

Higher oil and agricultural commodity prices resulted in

appreciation of the currencies of Canada, Brazil, and Mexico

relative to the US dollar during the quarter.


8

Box 1: External Competitiveness in Jamaica Introduction In a context of persistently weak economic growth and high current

account deficits over the past decade, there has been heightened

focus among policy makers on the external competitiveness of the

Jamaican economy.3 It has been argued that Jamaica could see

significant improvements in these and other macroeconomic

indicators by producing goods and services at prices and qualities,

which are at least comparable to those of other producers in the

world. This would induce both domestic and external consumers to

demand more locally produced goods and services.

With respect to the goods and services exported, Jamaica’s share of

world exports has declined since at least 2002. This loss in

competitiveness has been particularly evident in the export of

manufactured goods, the share of which fell from 0.66 per cent in

2002 to 0.19 per cent in 2010. The impact of this deterioration has

been partly tempered by the share of earnings from world travel

which has remained relatively stable during the period (see Figure 1). With respect to Jamaica’s trading partners, the USA remains the

largest, with Trinidad and Tobago, Venezuela, the European

Union, Canada and China being the next five largest trading

partners.

Figure 1

3 Over the past decade the current account deficit averaged in excess of

10.0 per cent of GDP while economic growth averaged 1.6 per cent, abstracting for the impact of the global recession.

Against this background, this box highlights the various price

and non-price measures of competitiveness monitored by the

BOJ and discusses some of the policy issues that need to be

considered when addressing the country’s weak competitiveness. Measures of External Price Competitiveness There is no single measure that accurately gauges the

competitive position of a country. Some of the measures

monitored by the BOJ, at the macroeconomic level, include the

real effective exchange rate (REER) and the ratio of tradable to

non-tradable prices.4 At the sectoral level, the Bank uses the

exchange rate deflated by unit labour costs of the manufacturing

sector (RER-ULC) and the profitability of the manufacturing

sector.

The REER

The REER is one of the most commonly used indicators of

external competitiveness globally. It is calculated by

adjusting the nominal effective exchange rate (NEER) with

the relative price index.5 The price index most frequently

used is the CPI largely because of the availability of

comparative data.

The REER calculation may be expressed as:

REER =

where:

r is the domestic exchange rate (expressed as the quantity of the

foreign currency required to purchase a unit of domestic

currency) index,

r* is the trading partners’ exchange rate index,

p is the domestic price index and

p* is the foreign price index.

4 The BOJ also monitors the real equilibrium exchange rate.

5 The NEER is the ratio of the domestic and foreign exchange rate

indices. Prices and exchange rates are weighted based on the

proportion of bi-lateral trade with Jamaica’s major trading partners in the base year.

** p

p

r

r


9

An improvement in competitiveness, as measured by a decline in

the REER, emanates from either depreciation in the NEER or a

decline in relative prices. A depreciation in the NEER is

represented by a decline in the value of the domestic currency vis-

à-vis the foreign currency or an appreciation of the currencies of

the country’s main trading partners against the US dollar.

Similarly, the REER would decline if the rate of inflation for the

domestic economy is below that of the country’s main trading

partners.

The REER for Jamaica indicates an overall loss in competitiveness

over the past decade largely associated with heightened inflation.

This was despite an improvement during the period FY2001/02 to

FY2003/04 (see Figure 2). The short period of gain was largely

influenced by movements in relative exchange rates, particularly in

FY2002/03 given a relatively sharp depreciation in the value of the

Jamaica Dollar vis-á-vis the US dollar during that period. The

overall loss in competitiveness was largely associated with

heightened domestic inflation relative to our major trading partners,

partly explained by imported inflation (which incorporates

exchange rate changes) and recurring supply shocks resulting from

adverse weather. There was a rapid deterioration between

FY2007/08 and FY2011/12 notwithstanding relatively sharp

depreciation in the domestic bilateral exchange rate in FY2008/09

and FY2009/10.

Figure 2 Real Effective Exchange Rate

RER Deflated by the ULC of the Manufacturing Sector

The trend in the changes in relative unit labour costs is a vital

component of fluctuations in a country’s external

competitiveness. Domestic ULC is measured by dividing the

total compensation to employees by the nominal value-added in

the manufacturing sector, represented as:

ULC = AS × E × 52

VA

where:

VA is nominal value-added in the manufacturing sector,

AS is the average cost per employee per week,

E is employed labour force in the manufacturing sector.

This is compared to the ULC in the manufacturing sector of the

country’s major trading partners. External competitiveness, as

measured by the RER-ULC, indicates an improvement in

Jamaica’s position since 2006 based on a faster rate of increase

in the ULC for the USA (and other OECD countries) relative to

that of Jamaica (see Figure 3).


10

Figure 3

This improvement may be attributed to a faster increase in the

nominal value added in the domestic manufacturing sector relative

to the increase in the total compensation to employees in that sector

over the period. Notably, the average nominal value added for the

manufacturing sector rose by approximately 10.0 per cent per

annum while the total labour compensation grew at an annual pace

of approximately 5.0 per cent between 2006 and 2011.6

The ULC, however, does not take account of other factors in the

production process, for example, energy costs which is also

important. Analysis of comparative energy costs between Jamaica

and the USA indicates that the average cost of electricity per

kilowatt hour (KWH) in Jamaica is approximately twice that of the

USA. For example, over the year ended February 2012, the average

monthly cost of electricity in Jamaica was approximately US$0.37

while the cost in the USA approximated US$0.13 per KWH. These

numbers compare to respective average cost of US$0.16 US$0.08

per KWH in 2002.

Profitability of the Manufacturing Sector

Another indicator of competitiveness is the profitability in

producing tradable goods. The sector most commonly measured is

6 Data available for calendar years.

the manufacturing sector. In the context of competitiveness,

profitability of the manufacturing sector is measured as the ratio

of the value added deflator in manufacturing relative to the ULC.

Profitability will improve if the ULC falls relative to the price of

the manufactured good. This measure assumes that an increase

in the profits of domestic producers of tradable goods would

enable increased competitiveness which for Jamaica, has shown

a consistent increase since 2001 (see Figure 4).

Figure 4

Ratio of Tradable to Non-tradable Prices

The ratio of the prices of tradable goods to non-tradable goods is

another measure used by the Bank to assess a country’s external

competitiveness. The ratio is generally represented as PT /PNT

where:

PT is the price index of tradable goods and

PNT is the price index of non-tradable goods

The price indices reflect changes in the sectoral deflators. Each

index is the weighted average of the deflators for each sector

where the weights are the nominal value added for each sector.

An increase in the price of tradable goods relative to the non-

tradable goods reflects an improvement in a country’s external

competitiveness. If this occurs, there would be a greater

incentive to invest in the tradables sector.


11

For Jamaica, the Bank defines tradable goods to include export

agriculture, products generated from mining and quarrying

activities and manufactured goods such as textiles, while non-

tradable goods consist of construction and services (excluding

hotels). Since 2001, the price index for non-tradables has increased

at a faster pace resulting in a downward trend in the ratio (see

Figure 5). This suggests that Jamaica has lost competitiveness over

the review period.

Figure 5

External Non-price Competitiveness

Price measures alone are not sufficient in assessing a country’s

competitiveness. Non-price measures which include factors such as

technological capabilities, the quality of the country’s

infrastructure, the ease of doing business and social issues such as

crime also affect competitiveness. Hence, in addition to the price

measures cited above, the Bank also monitors some non-price

measures. Chief among them are the measures cited in the World

Economic Forum’s (WEF) Global Competitiveness Report and the

World Bank’s Doing Business Report.

WEF Global Competitiveness Report 2011-2012

The WEF computes a global competitiveness index (GCI) as

a weighted average of twelve pillars of competitiveness for

each country including, inter alia, institutions, infrastructure,

macroeconomic environment, health and primary education,

labour market efficiency and innovation. The GCI uses

over 110 indicators to assess and categorize a country's

competitiveness using data from public and private

sources. The data is then normalized for each indicator in

all countries to generate a grade using a scale. The grade in

individual indicators is then added for each country which

is in turn divided by the number of indicators. This results

in an average grade for all indicators which represents the

country's competitiveness index.

The WEF Global Competitiveness Report for 2011-12 noted that

the main challenges that constrain competitiveness in Jamaica

and other Latin America and Caribbean countries are: (1) weak

institutions with high costs associated with a lack of physical

security; (2) poor development of infrastructure; (3) an

inefficient allocation of production and human resources; and,

(4) an increasing lag in innovation vis-à-vis more developed, but

also emerging, economies. Notwithstanding this general

classification, Jamaica ranks lowly in broad measures of global

competitiveness, when compared to these countries (see Figure 6).

Figure 6

*Source: WEF 2012

With respect to its assessment of Jamaica, the WEF indicated a

decline in Jamaica’s rank to 107 in the index of 142 countries


12

relative to 95 out of the 139 countries in the 2010 survey.7

Analysis of previous years shows that for a number of indicators,

the ranking was partly influenced by a lower score. For example in

2008, Jamaica scored 3.6 in innovation. However, this score was

reduced to 3.4 by 2011. There were also a few indicators, for

example infrastructure, in which Jamaica gained a higher score but

received a lower rank.

For 2011, the decline in Jamaica’s ranking was primarily evidenced

in the Basic Requirement Pillar, representing a fall in Jamaica’s

rank to 116 from 103. With respect to the basic requirement index,

all the component rankings deteriorated. In this regard, Jamaica’s

ranking for the level of development of its infrastructure

deteriorated from a ranking of 65 to 79 in the 2011-12 report. The

country’s rankings in terms of the quality of roads, available airline

seats, fixed telephone lines and mobile telephone subscriptions all

deteriorated. There was also some deterioration in the Efficiency

Enhancer Index largely due to reduced rankings for financial

market development and technological readiness. The lower

ranking for financial market development was largely associated

with a downgrade of Jamaica’s status in relation to the availability

of venture capital while that for technological readiness reflected a

lower ranking for internet penetration. The most significant

deterrent to doing business in Jamaica continued to be crime and

theft, which deteriorated further relative to 2010-2011 (see

Figure 7).

Figure 7

*Source: World Bank 2012

7 In 2002, Jamaica was ranked 60th among a total of 80 countries.

World Bank Doing Business Report – 2012

The World Bank Doing Business Report for 2012 also

highlighted some major obstacles to doing business in Jamaica,

relative to the rest of the world. Chief among them were paying

taxes, enforcing contracts and registering property (See Figure 8). These factors mainly contributed to an overall ranking of 88

for Jamaica compared to a previous ranking of 85 for 2011 and

43 in 20068.

Figure 8

**Source: World Bank 2012

Summary and Policy Issues Most measures of competitiveness monitored by the BOJ

indicate that Jamaica has lost competitiveness over the past

decade. This loss in competitiveness can be addressed through

adjusting relative prices and the structural issues impeding

competitiveness. In this regard, any attempt to reverse this loss

in competitiveness through a reliance on relative price

adjustments alone would be insufficient.

With respect to relative prices, one avenue to regain

competitiveness is through a relatively sharp depreciation of the

8 The 2006 report reflects the least recent comparative ranking for each

country out of 155 countries.


13

exchange rate which would have to significantly outweigh relative

price increases. However, this mechanism is dependent on the

extent of the pass through of exchange rate changes to domestic

inflation and the impact of the depreciation on the import cost in

the production process.9 In addition, elasticity estimates for

Jamaica show that the responsiveness of imports and exports to

exchange rate changes is generally low.10

In this regard, a sharp

depreciation of the exchange rate may not generate the required

response. Moreover, the exchange rate has traditionally served as

an important anchor to inflation expectations in Jamaica.

Given the impact of adverse weather on inflation, further measures

should be put in place to reduce the country’s vulnerability to these

types of shocks. A continuation of the drive towards cheaper and

more reliable sources of energy would also contribute to lower

inflation and an improvement in competitiveness.

Jamaica should also aim at improving the non-price measures and

structural problems that challenge or constrain competitiveness, as

cited by the World Bank Doing Business and the WEF Global

Competitiveness Reports. In doing so, Jamaica could likely see

significant improvement in its macroeconomic indicators, including

economic growth and the current account deficit.

9 McFarlene (2002) estimated that 80.0 per cent of the exchange rate

depreciation in the pre-1995 period was passed through within six

months. The BOJ estimates that this has now slowed to around 50 per cent. 10

See Henry, C. and Longmore, R., (2003) “Current Account Dynamics

and the Real Effective Exchange Rate: The Jamaican Experience.” Bank

of Jamaica Working Paper.


Monetary Policy and Financial Markets 14

Figure 2.1 Interest rate on BOJ 30-day Certificate of Deposit

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

Per

Cen

t

Table 2.1

Outturn

Mar'12

Quarter

Outturn

FY11/12

Original

Target for

FY11/12

Inflation

(% Change) 1.7 7.3 6.0-8.0

Gross Foreign Assets (eop)*

(US$MN.) 2 638.9 2 638.9 3 138.6

Selected Economic Indicators

Money & Credit Monetary Policy and Base Money Management

The Bank maintained its monetary policy stance during the March

2012 quarter in the context of uncertainties surrounding the timing of

the re-engagement with the International Monetary Fund (IMF), the

debt crisis in the Eurozone as well as concerns regarding the

persistent volatility of oil prices. The domestic macroeconomic

environment, however, remained relatively stable.

Reflective of the seasonal decline in currency issue, the monetary

base contracted by $8.0 billion (8.7 per cent) during the March 2012

quarter. This was a sharper contraction relative to that for the March

2011 quarter and occurred in a context of weaker gross domestic

product (GDP) for the quarter. For FY2011/12, the monetary base

expanded by 6.1 per cent, relative to an expansion of 2.1 per cent for

FY2010/11.

During the March 2012 quarter, the Bank maintained its policy rate,

which is the 30-day Certificate of Deposit (CD), at 6.25 per cent (see

Figure 2.1). The rate on the Bank’s overnight instrument was kept

constant at 0.25 per cent throughout FY2011/12, while the cash

reserve and liquid assets requirements were maintained at 12.0 per

cent and 26.0 per cent, respectively. For FY2011/12, the Bank

lowered its policy rate by 50 basis points. These decisions were made

in a context of uncertainty regarding the debt crisis in the Eurozone,

volatility in oil prices as well the timing of Jamaica’s re-engagement

with the IMF. Notwithstanding, the macroenvironment continued to

be relatively stable. Annual inflation over the quarter remained within

the target range of 6.0 per cent to 8.0 per cent. The exchange rate

remained generally stable and the net international reserves (NIR)

remained robust.

The monetary base contracted by $8.0 billion or 8.7 per cent during

the March 2012 quarter; this compares to the decline of 7.3 per cent

for the March 2011 quarter (see Table 2.2 and Figure 2.2). The

contraction in the monetary base for the review quarter predominantly

reflected net currency redemption of $9.0 billion (14.4 per cent),

relative to $6.4 billion (11.3 per cent) in the March 2011 quarter.

2. Monetary Policy and Financial Markets



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 original target for the NIR was US$1 800.7 million for

FY2011/12.

An increase of $1.0 billion in commercial banks’ cash reserves

partially offset the impact of the contraction in currency on the

monetary base. The sharp fall in currency was consistent with an

estimated deceleration in economic activity for the review quarter.

The contraction in the monetary base was largely influenced by a

decline of $16.9 billion (US$189.0 million) in the NIR, which was

partly offset by an increase of $8.9 billion in the net domestic assets

(NDA) (see Figure 2.3). For the NIR, the decline mainly reflected

intervention sales to the market as well as debt payments on behalf of

the Central Government. Within the NDA, there was net drawdown of

$20.5 billion in Central Government deposits, reflective of debt

payments, particularly in February. This liquidity impact was partially

offset by net placements of $12.7 billion on open market operation

(OMO) instruments.

For FY2011/12, the monetary base expanded by $4.8 billion (6.1 per

cent) relative to an expansion of 2.1 per cent for FY2010/11. This

growth largely reflected net currency issue of $3.3 billion (6.6 per

cent) as well as an increase of $2.4 billion (8.6 per cent) in

commercial banks’ cash reserves. The impact of these transactions

was partially offset by a decline of $920.1 million in commercial

banks’ current account. The main sources of the expansion in the

monetary base were net drawdown of $37.3 billion in Central

Government deposits at the Bank and net unwinding of $32.1 billion

in OMO securities. There was, however, a decline of $69.3 billion

(US$776.0 million) in the NIR.

Outturn

Dec'11

Quarter

Outturn

Mar'12

Quarter

%

Change

Net International Reserves 1 966.1 1 777.1 -9.6

(US$ MN.)

Net Domestic Assets

(J$MN.) -83 961.8 -75 089.9 10.6

Monetary Base

(J$MN.) 91 710.1 83 696.7 -8.7

Base Money Indicators

-20000

-10000

0

10000

20000

30000

J$ M

illio

n

NIR OMO GOJ

-15.0

-5.0

5.0

15.0

25.0

Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

Per

cen

t

Quarter

Unadjusted Seasonally adjusted



Figure 2.4 Money Supply

(Quarterly Growth Rates)

March 2006 to March 2012

-6.0-4.0-2.00.02.04.06.08.0

10.012.0

Pe

r C

en

t

M3J M3*

Table 2.3

Figure 2.5 Deposits in Commercial Banks

(Quarterly Growth Rates)


Money Supply

Broad Jamaica Dollar money supply (M3J) declined by 2.0 per cent

during the March 2012 quarter, a sharper contraction than the

reduction for the corresponding quarter of 2011. The reduction in

money supply during the review quarter occurred in the context of

continued weak domestic demand conditions. However, for FY2011/12,

M3J grew by 8.9 per cent but was below the average increase of 9.6 per

cent for the last five fiscal years.

The measure of money supply that includes foreign currency deposits

(M3*) increased marginally by 0.1 per cent during the quarter, in

contrast to a reduction of 0.6 per cent for the corresponding quarter of

2011.11 Within M3*, foreign currency deposits grew by 6.9 per cent,

relative to a reduction of 0.3 per cent for the March 2011 quarter. For

FY 2011/12, foreign currency deposits increased by 6.1 per cent in

contrast to the reduction of 8.3 per cent in the previous fiscal year.

Notwithstanding the increase in foreign currency deposits, at end-

March 2012, the level of dollarization was largely in line with the ratio

at end-March 2011.

For the March 2012 quarter, broad Jamaica Dollar money supply (M3J)

fell by 2.0 per cent. This reduction was sharper than the contraction of

0.6 per cent in the corresponding quarter of 2011 and the average

decline of 1.8 per cent for the last five March quarters (see Figure 2.4).

The contraction in the review quarter constrained growth in M3J for the

fiscal year to 8.9 per cent, below the average of 9.6 per cent for the last

five fiscal years (see Table 2.3). The relatively sharper contraction in

money supply during the March 2012 quarter occurred in the context of

continued weak domestic demand conditions influenced in part by

increased unemployment in 2011 and a contraction in real wages in the

December 2011 quarter (see Real Sector).

The main source of contraction in M3J for the review quarter was a

decline of $17.0 billion in the NIR. This decline was relative to the

increase of $34.1 billion the corresponding quarter of 2011. The impact

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

Money Supply (12-month growth rates)

MJ Mar-11 Mar-12

M1J 8.5 6.5

M2J 7.3 4.7

M3J 8.3 8.9

M*

M1* 5.4 5.7

M2* 1.7 5.1

M3* 3.6 8.2

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Per

Cent

Local Currency Foreign Currency

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



Table 2.4

Mar-11 Mar-12

Local Currency Deposits 1.2 -0.5

Demand deposits -1.3 -5.9

Savings deposits 0.3 0.3

Time deposits 3.3 -0.9

Other Deposits 2.9 1.6

Local Currency DepositsQuarterly Growth ( % )

Figure 2.6 Foreign Currency Deposits to Total Deposits


Table 2.5

of the reduction in the NIR during the review quarter was

complemented by net placements on BOJ Certificates of Deposit (CDs)

of $12.7 billion, (12.8 per cent) relative to net placements of $14.5

billion (11.2 per cent) in the March 2011 quarter (see Base Money Management). There was a partially offsetting impact from growth of

3.0 per cent in private sector credit, continuing the trend since the start

of 2011.

The reduction in the money supply during the review quarter was

reflected in respective declines of 10.2 per cent and 0.5 per cent, in

currency in circulation and local currency deposits. The fall in currency

in circulation reflected the seasonal net redemptions following the

Christmas holidays. This net redemption was broadly in line with the

contraction of 10.4 per cent in the corresponding quarter of 2011 but

lower than the average decline of 12.6 per cent for the last five March

quarters. For FY 2011/12, growth in currency in circulation was 9.3 per

cent, above the expansion of 7.1 per cent for FY 2010/11. In real terms,

there was an increase of 1.9 per cent in currency in circulation for the

FY 2011/12 in contrast to the decline of 0.7 per cent for the previous

fiscal year. The real increase in currency may be attributed to the

nascent recovery in real economic activity during the last four quarters

(see Real Sector).

The decline in local currency deposits during the review quarter was in

contrast to the increase of 1.2 per cent in the corresponding quarter of

2011 and the average growth of 0.1 per cent for the last five March

quarters. The reduction in local currency deposits was reflected in

demand and time deposits (see Table 2.4). For FY2011/12, local

currency deposits grew by 8.8 per cent, relative to 8.5 per cent for the

previous fiscal year, largely buoyed by a significant increase in other

deposits.

During the review quarter, M3* grew marginally by 0.1 per cent, in

contrast to a reduction of 0.6 per cent for the March 2011 quarter (see

Figure 2.4). Within M3*, foreign currency deposits increased by 6.9 per

cent, following growth of 1.6 per cent in the December 2011 quarter.

This increase was consistent with the uncertainties which usually

surround a general election as well as the on-going discussions with the

IMF. The growth in foreign currency deposits during the review

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

Per

cent

Mar-11 Dec-11 Mar-12

Currency to Deposits (%) 15.70 17.47 15.77

Reserves to Deposits (%) 12.85 12.84 12.05

Money Multiplier 4.05 3.87 4.16

COMPONENTS OF THE MONEY MULTIPLIER (M3J)



Table 2.6

quarter was reflected in all components, particularly the savings

deposits of non-profit organizations. There was also a modest increase

in the foreign currency demand deposits held by business firms. For FY

2011/12, foreign currency deposits increased by 6.1 per cent, in contrast

to the reduction of 8.3 per cent in the previous fiscal year. At end-March

2012, the ratio of foreign currency deposits to total deposits was 27.4

per cent, relative to 26.0 per cent at end-December 2011 and 27.9 per

cent at end-March 2011 (see Figure 2.6). This increase occurred in a

context of a faster increase in foreign currency deposits relative to the

growth in total deposits.

At end-March 2012, the money multiplier corresponding to M3J was 4.16,

relative to 3.87 at end-December 2011. This increase reflected declines in

both the currency to deposit and the reserve to deposit ratios (see Table 2.5). The decline in the currency to deposit ratio was largely as a

consequence of the seasonal net currency redemption during the period.

Over the March 2012 quarter, commercial banks’ weighted average

deposit rate declined by 24 basis points (bps) to 2.20 per cent. This decline

largely reflected reductions in the rate on savings and demand deposits

(see Table 2.6). In contrast, the weighted average foreign currency deposit

rate increased by 4 bps to 1.42 per cent, largely reflecting an increase in

the rate for time deposits.


WEIGHTED AVERAGE Domestic Currency Overall 2.65 2.44 2.20

Demand 1.53 1.43 1.36

Savings 2.25 1.98 1.82

Time 4.52 4.16 5.86

Foreign Currency Overall 1.41 1.38 1.42Demand 0.84 0.84 0.76

Savings 0.83 0.72 0.77

Time 2.67 2.71 2.77

BO J 30-DAY CERTIFICATEO F DEPO SIT RATE 6.75 6.25 6.25

COMMERCIAL BANK DEPOSIT RATES INTEREST RATES IN THE DOMESTIC MARKET




Business Lending -767.1 9 021.6 5 189.3Agriculture & Fishing -99.0 456.2 972.5

Mining & Quarrying 5.4 101.5 -74.3

Manufacturing 180.7 -21.4 595.0

Construction & Land Dev. -1 972.8 1 263.1 1 508.5

Transport, Storage & Comm. -75.3 2 815.8 -493.8

Tourism -551.0 -104.5 -1 565.8

Distribution 99.2 3 522.0 4 523.3

Professional & Other Services 240.0 897.0 -963.1

Electricity, Gas & Water 1 435.7 61.8 626.0

Entertainment -29.9 30.0 60.9

Personal & Other Lending 813.6 4 904.6 4 059.7Personal 829.2 4 917.1 4 279.4

Overseas Residents -15.7 -12.4 -219.7

Net Lending/(Repayment) 46.4 13 926.2 9 249.0

Commercial Bank Distribution of Total Loans & Advances to the Private Sector

(Quarterly Flows J$MN)

Figure 2.7 Quarterly Growth Rates of Private Sector Credit


Table 2.7


Total Private Sector Credit 62.9 13 944.6 9 419.4Change (%) 0.03 6.2 3.9

of which

Loans and Advances 46.4 13 926.2 9 249.0

Domestic residents 62.1 13 938.7 9 468.7

Overseas residents -15.7 -12.4 -219.7

Corporate Securities 0.8 6.0 -49.3

Commercial Bank Distribution of Total Credit to the Private Sector

(Flows J$MN)

Table 2.8

Private Sector Credit

Credit extended by commercial banks to the private sector grew by 3.9

per cent during the March 2012 quarter, compared with negligible

growth in the corresponding quarter of 2011. The outturn for the review

quarter was stronger than the average growth for the previous five

March quarters. Of note, for the second consecutive quarter, growth in

business lending outpaced that for personal lending. In addition, there

was an improvement in the quality of commercial banks’ loan portfolio,

while lending rates declined marginally during the quarter.

For the quarter ended March 2012, the stock of credit to the private

sector grew by 3.9 per cent (see Table 2.7). This increase was below the

expansion of 6.2 per cent for the December 2011 quarter but compares

favourably to the average growth of 2.4 per cent for the previous five

March quarters. The outturn for the review quarter brought growth in

credit for FY2011/12 to 13.8 per cent, relative to 1.3 per cent for the

previous fiscal year.

Within private sector credit, loans and advances grew by $9 249.0

million (3.8 per cent) during the review quarter relative to marginal

growth of $46.4 million (0.02 per cent) during the March 2011 quarter

(see Table 2.8). Of the increase for the quarter, local currency

denominated loans accounted for 89.5 per cent. The expansion in loans

and advances reflected growth in both business and personal lending.

Business Lending

Net lending to the business sector grew by $5 189.3 million (3.9 per

cent) for the review quarter (see Table 2.8). This expansion was lower

than the growth for the previous quarter but was in contrast to net

repayments of $767.1 million (0.6 per cent) for March 2011 quarter.

Agriculture & Fishing, Distribution and Construction & Land

Development were largely responsible for the growth in net lending to

businesses. In contrast, there was net repayment for Tourism,

Professional & Other Services and Transport, Storage &

Communication.



Table 2.9

Table 2.10

The expansion in Distribution was largely denominated in foreign

currency and represented a syndicated facility to a group for loan re-

financing and the provision of working capital (see Tables 2.9 and 2.10). The growth in Agriculture & Fishing is consistent with the

outlook for the real sector (see Economic Outlook and Monetary Policy Perspectives).

Personal and Other Lending

Personal loans expanded by $4 279.4 million (4.2 per cent) during the

review quarter, continuing the pattern of strong growth observed since

the June 2011 quarter (see Table 2.8). The expansion in the review

quarter was reflected in local currency denominated loans.

Within personal loans, term loans expanded by $2 660.6 million (8.4 per

cent), a continuation of the significant growth observed since June 2009

quarter. Instalment credit, another component of personal loans,

increased by $748.0 million (2.2 per cent) during the March 2012

quarter, approximately the same rate of growth realised in the March

2011 quarter. This increase was largely reflected in loans for motor cars

and debt consolidation, which grew by 4.8 per cent and 1.4 per cent,

respectively (see Table 2.11). Consistent with the growth in loans for

debt consolidation, growth in commercial banks’ credit card receivables

remained flat.

Interest Rates

The weighted average interest rate on commercial bank loans reflected

further reduction in sectoral lending rates during the March 2012

quarter. In particular, the weighted average rate on public sector loans

declined by 13 basis points (bps), while the equivalent rate on private

sector loans declined by 35 bps. These movements facilitated a decline

in the overall weighted average rate by 33 bps to 17.70 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. The largest

decline of 58 bps was observed in the weighted average rate on

commercial loans, which has been falling consistently since the March

2011 quarter. There was also a notable decline in the weighted average

interest rate on mortgage financing, which followed a much sharper

reduction during the previous quarter. The continuous declines in

mortgage rates may be attributed to increased competition among

Mar-11 Dec-11 Mar-12Business Lending 876.0 2 779.1 3 703.9Agriculture & Fishing 344.9 364.7 855.6

Mining & Quarrying 7.7 110.8 -82.9

Manufacturing 118.1 -364.4 1 179.4

Construction & Land Dev. 292.4 -147.4 1 107.4

Transport, Storage & Comm. 89.1 -81.2 -452.0

Tourism 55.4 148.4 -309.3

Distribution 232.0 1 845.8 1 480.6

Professional & Other Services -234.4 707.2 -492.4

Electricity, Gas & Water 31.1 150.8 445.3

Entertainment -60.3 44.5 -27.8

Personal & Other Lending 1 274.2 4 686.4 4 573.5Personal 1 297.1 4 713.3 4 595.1

Overseas Residents -22.8 -26.9 -21.6

Net Lending/(Repayment) 2 150.2 7 465.5 8 277.4

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

(Quarterly Flows J$MN)

Mar-11 Dec-11 Mar-12Business Lending -18.3 69.8 10.1Agriculture & Fishing -5.2 1.0 1.2

Mining & Quarrying 0.0 -0.1 0.1

Manufacturing 0.8 3.9 -6.9

Construction & Land Development -26.3 15.9 3.2

Transport, Storage & Comm. -1.9 33.4 -1.1

Tourism -6.7 -4.0 -17.1

Distribution -1.4 19.1 34.1

Electricity, Gas & Water 16.5 -1.2 1.6

Entertainment 0.4 -0.2 1.0

Professional & Other Services 5.6 2.0 -6.0

Persoanl & Other Lending -5.2 2.0 -7.1Personal -5.4 2.1 -4.2

Overseas Residents 0.2 -0.1 -2.9

Total Net Lending/(Repayment) Flows -23.5 71.8 2.9

Commercial Bank Distribution of Foreign Currency Loans & Advances to the

Private Sector (Quarterly Flows US$MN)



Table 2.11

Table 2.12

2011 2012Mar Jun Sep Dec Mar

Overall 20.52 20.10 18.34 18.03 17.70

Public Sector 11.58 10.13 10.40 9.98 9.85 Local Govt. & Other

Public Entities 12.94 10.17 11.14 10.61 9.95

Central Government 11.00 10.12 10.12 9.77 9.80

Private Sector 20.97 20.54 18.65 18.31 17.96 Instalment 20.63 20.20 19.56 19.20 18.92

Mortgage 15.83 15.05 13.40 12.36 12.20

Personal 25.70 25.48 21.73 21.66 21.57

Commercial 16.63 15.91 15.12 14.63 14.05

Commercial BankDomestic Currency Average Weighted

Lending Rates by Loan Type(Per Cent)

Figure 2.8

Commercial Bank Past due Loans

(Three Months and over) to Total Loans


building societies in the context of recent policy initiatives to spur

growth.12

The decline in the weighted average lending rate to the public sector for

the review quarter reflected a decline of 66 bps in the average lending

rate to Local Government & Other Public Sector entities. However, the

average lending rate to Central Government increased by 3 bps.

Loan Quality

There was a marginal improvement in commercial bank loan quality

during the review quarter. At end-March 2012, the ratio of non-

performing loans to total loans was 8.4 per cent, marginally lower than

the rate at end-December 2011 (see Figure 2.8).13

The ratio of non-

performing loans to private sector loans at end-March 2012 also

declined to 9.3 per cent, relative to 9.6 per cent at end-2011.

12

The reduction of transfer tax and stamp duty on mortgage refinancing (announced

in the 2011/12 budget) were some of the key policy changes.

13 Non-performing loans are past due loans 3 months and over.

8.8 8.4

9.6 9.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

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

Non-performing to Total Loans Non-performing to Private Sector Loans


Credit Card Receivables -746.5 711.7 34.0

Change (%) -3.8 3.6 0.2

Term Loans 3 185.9 2 871.1 2 660.6

Change (%) 14.7 10.0 8.4

Installment Credit 667.0 930.5 748.0

Change (%) 2.3 2.9 2.2

of which

Motor Cars 100.0 402.1 563.8

Change (%) 0.9 3.6 4.8

Debt Consolidation 451.0 415.9 132.5

Change (%) 8.0 4.6 1.4

Commercial Bank Distribution of Selected Personal Loans Categories

(Flows J$MN)



Table 2.13

Issue Date Tenor Avg. yield Amount AmountAllotted Maturing

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

14-Dec-11 28 6.49 400.0 400.0

23-Dec-11 91 6.21 400.0 400.0

23-Dec-11 182 6.46 400.0 400.0

18-Jan-12 28 6.41 400.0 400.0

25-Jan-12 91 6.22 400.0 400.0

25-Jan-12 182 6.53 400.0 400.0

15-Feb-12 28 6.36 400.0 400.0

15-Feb-12 91 6.21 400.0 400.0

15-Feb-12 182 6.57 400.0 400.0

21-Mar-12 28 6.24 400.0 400.0

21-Mar-12 91 6.27 400.0 400.0

21-Mar-12 182 6.47 400.0 400.0

Treasury Bill Auctions and MaturitiesDecember 2011 - March 2012

Bond Market

During the March 2012 quarter, market-determined interest rates

exhibited mixed movements. While the average yields on the GOJ 30-

day Treasury Bill declined over the quarter, the average yield on the 90-

day increased and the 180-day remained relatively flat. These

movements reflected a convergence to BOJ’s policy rate. However,

private money market rates increased, on average during the review

quarter, reflecting increased concentration of liquidity in a few

institutions as well as the impact on liquidity of GOJ debt-raising

activities.

There were net maturities on GOJ debt instruments for the review

quarter, mainly reflecting the maturity of a 2-year Fixed Rate (FR)

Benchmark Investment (BMI) Note. The GOJ issued seven debt

instruments during the quarter, two of which were new. The preference

for variable rate instruments by investors continued during the quarter,

as reflected in the stronger level of subscriptions.

In the context of an improvement in the prospects for the Euro area,

there was a decline in the average yield on GOJ global bonds during

the review quarter relative to the December 2011 quarter.

Notwithstanding, the spread between the yields on GOJ global bonds

and the US Treasury bills widened, largely related to market

perceptions of increased domestic risk factors.

There were mixed movements in the average yields on GOJ Treasury

Bills during the March 2012 quarter. The average yield on the 30-day

Treasury Bill was lower by 25 basis points (bps) at end-March 2012,

relative to end-December 2011. In contrast, the average yields on the

90-day and 180-day Treasury Bills increased by 6 bps and 1 bp

respectively, over the same period (see Table 2.13). The movements in

the yield on the 90-day instrument reflected a convergence towards the

rate on the BOJ’s 30-day Certificate of Deposit (CD). At the end of the

review quarter, the yield on the 30-day Treasury Bill was 1 bp below the

yield on the Bank’s corresponding OMO instrument.

Average overnight and 30-day repo rates increased to 3.90 per cent and

6.40 per cent, respectively, from 3.50 per cent and 6.30 per cent in the

December 2012 quarter. These increases reflected the impact of debt-

2.0

3.0

4.0

5.0

6.0

7.0

8.0

%

Figure 2.9 Average Private Money Market Rates

October 2011 - March 2012

O/N 30-day I/B



Table 2.14

Table 2.15

raising activities of the Government in mid-January and February. In

addition, the increases in rates were due to the concentration of domestic

liquidity emanating from OMO maturities in a few institutions during

the review period. In contrast to the movements in the other private

money market rates, average inter-bank rates declined to 3.50 per cent

in the March 2012 quarter from 3.60 per cent for the previous quarter.

There was an overall net placement of $14.9 billion on the Bank’s 30-

day CD during the review quarter, compared to net maturity of $28.2

billion the previous quarter (see Table 2.14). The net placement on

BOJ’s 30-day CD was partly financed from currency reflows as well as

proceeds from the maturity of the FR BMI Note in February. The Bank

continued to offer the 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).

The Government net redeemed approximately $7.7 billion in domestic

debt for the quarter, compared with a net issue of $14.4 billion for the

December 2011 quarter. Seven instruments were issued during the

quarter, two of which were new primary issues; a FR 7.20% BMI Note,

scheduled to mature in 2015 and an 8-year Variable Rate (VR) BMI

Note (see Appendix, Tables 8A and 8B). The FR 7.20% BMI Note

was a limited auction of $4.0 billion and was oversubscribed by 90.1 per

cent. The average yield on this instrument was 7.22 per cent.14

In

relation to the VR instrument, the re-pricing margin was set at 1.375

percentage points above the yield on the 180-day Treasury Bill, relative

to previously issued VR BMIs that were linked to the 90-day Treasury

Bill. Including the new primary issue, a total of four VR BMI Notes

were issued, representing 81.0 per cent of gross financing for the period.

With regards to amortisation, the FR 12.0% BMI Note which matured in

February yielding liquidity of $33.0 billion, represented the first

maturity of the debt instruments created in the Jamaica Debt Exchange

(see Table 2.15).

For the March 2012 quarter, the average yield on GOJ global bonds

decreased to 7.42 per cent from 7.48 per cent in the December 2011

quarter. This reduction coincided with an improvement in the

international financial market’s view about the prospects for the Euro

14

This outturn was in comparison to the yield to maturity of 6.95 per cent on the

GOJ’s FR 12.0% BMI Note 2014.

3.003.504.004.505.005.506.006.507.007.508.008.509.009.50

Figure 2.12 GOJ Global Bond Yields

October 2011- March 2012

GOJGB Average Yield2015 USD denom.2017 USD denom.

(J$MN)January - March 2012Placements 285 992.0

Maturities 271 082.8

Net Placements 14 909.2

October - December 2011Placements 277 588.9

Maturities 305 747.7

Net Placements -28 158.7

Placements and Maturities in BOJ OMO Instruments:

30-day

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

Treasury Bills 3 600.0 3 600.0 0.0

Fixed Rate Benchmark Inv. Note 4 794.0 32 988.0 -28 194.0

Var. Rate Benchmark Inv. Note 20 501.0 0.0 20 501.0

TOTAL 28 895.0 36 588.0 -7 693.0

GOJ Public Domestic Debt RaisingJanuary - March 2012



0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Per

cen

tage

poi

nts

Figure 2.11Interest Rate Spread

GOJ Globals vs EMBI and US Treasuries

GOJ Global - EMBI

GOJ Global - US Treasuries

area in the context of the finalization of a second bailout package for

Greece. The decline in the average yield on GOJ global bonds was

largely reflected in the yields of the two euro-denominated bonds.

Notwithstanding the fall, the average spread between the yields on GOJ

global bonds and those on US Treasury bonds of a similar maturity

increased by 4 bps to 5.56 percentage points. The average yield spread

between the GOJ global bonds and the EMBI+ also increased by 34 bps

points to 2.05 percentage points, relative to the same measure at the end

of the previous quarter. This suggests that domestic risk factors affected

the market’s perception of Jamaican bonds over the quarter.



-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

JSE Index All JamaicaJSE Select Cross ListedJuniour Mrk (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

unit

s tr

aded

(MN

)

volumes traded values traded

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Retu

rn (%

)

Equities 30-day Repo Foreign Exchange

Stock Market All the JSE indices recorded declines for the March 2012 quarter, despite

improved earnings results of several listed companies, the continued low

domestic interest rates and relatively stable conditions in the foreign exchange

market. This decline in the local equities market was influenced by uncertainties

regarding the upcoming fiscal budget and the timing of a signing of a new

agreement between Jamaica and the International Monetary Fund.

For the March 2012 quarter, declines were recorded across all JSE indices within

a range of 1.2 per cent to 12.5 per cent. Notably, the Junior Market Index

recorded the sharpest decline among the indices.15

The sharp decline in the Junior

Market Index, which consistently outperformed the Main Market (JSE) Index

since its inception, can be attributed to uncertainty associated with the proposed

removal of the 50.0 per cent tax credit to companies during their second five

years as listed entities on the junior market. With respect to the JSE Index, for the

review quarter, the index declined by 4.1 per cent to close at 91 369.0 points. This

was in contrast to growth of 3.9 per cent and 1.5 per cent for the December 2011

and March 2011 quarters, respectively (see Figure 2.12). The decline occurred

despite improved earnings of several listed companies, relatively low domestic

interest rates and general stability in the foreign exchange market.16

The performance of the local equities market was reflected in declines in market

activity indicators during the review quarter. Specifically, the volume of stocks

traded, the value of transactions and the number of transactions declined by 42.9

per cent, 57.0 per cent and 17.7 per cent, respectively, relative to respective

growth of 20.0 per cent, 111.8 per cent and 3.2 per cent for the prior quarter (see

Figure 2.13). In addition, the advance-to-decline ratio was 6:25 which compares

unfavourably to a ratio of 26:6 recorded in the previous quarter. Stocks from

Finance and Manufacturing accounted for seven of the top ten declining stocks

and recorded respective average price depreciations of 18.7 per cent and 18.5 per

cent for the review quarter (see Table 2.16). Finance and Other accounted for

four of the six advancing stocks on the Main Market Index and recorded average

price increases of 6.6 per cent and 5.1 per cent, respectively, for the review

quarter (see Table 2.17).

15

Of note, for the quarter the All Jamaica, JSE Select, Cross-listed and Combined indices declined by 5.7

per cent, 5.2 per cent, 1.2 per cent and 4.4 per cent, respectively.

16 See Money and Credit and Foreign Exchange Market.

Figure 2.12 Quarterly Growth of the JSE Indices

March 2011 – March 2012

Figure 2.14

Average Monthly Returns from Equities,

Foreign Currency and Fixed Income

Investments

Figure 2.13 Quarterly Movements in Volumes & Values Traded

March 2011 – March 2012



Table 2.16

Price $ Qtr. Change

Companies ($) (%)

ManufacturingCaribbean Cement Company 2.4 -20.7

Jamaica Broilers Group 4.8 -18.6

Desnoes & Geddes 4.3 -16.2

FinanceJamaica Money Market Broker 9.8 -21.0

Scotia Investments Jamaica Ltd 23.2 -19.8

Barita Investments Limited 3.9 -17.2

Mayberry Investment Limited 2.7 -16.9

CommunicationsCable & Wireless 0.2 -20.0

TourismCiboney Group 0.04 -20.0

O therPulse Investments Ltd. 1.8 -27.8

Declining Stocks as at end-March 2012

Table 2.17

Price Qtr. Change Companies ($) (%)

Finance

Scotia Group Jamaica 26.7 11.3

Capital & Credit Financial Grp. 4.6 2.0

InsuranceSagicor Life Jamaica 10.8 8.3

O therPalace Amusement 55.0 10.0

Kingston Properties Limited 4.5 0.2

RetailCarreras Limited 63.0 2.4

Advancing Stocks as at end-March 2012

The poor performance of the JSE indices occurred within a context of negative

investor sentiments associated with uncertainty regarding the measures that might

be announced in the upcoming fiscal budget presentation and the timing and

terms of a new agreement between the International Monetary Fund and the

Government of Jamaica.17

17

Generally, when there is uncertainty in the economy, sentiment (investor) often turns negative resulting in

investors becoming more cautious and exiting asset classes that have higher risk.



(*) Volatility is calculated as the standard deviation of the daily

logarithmic returns, based on the WASR.

Foreign Exchange Market The foreign exchange rate remained relatively stable during the March

2012 quarter, as reflected in a marginal depreciation of 0.80 per cent in the

weighted average selling rate (WASR) of the US dollar vis-à-vis the

Jamaica Dollar. This followed a 0.34 per cent depreciation in the

preceding quarter (see Figure 2.15). The increased pace of depreciation

was principally influenced by periods of excess demand for foreign

currency associated with a decline in net private capital (NPC) inflows.

Against this background, the Bank sold US$102.1 million (net), to the

market during the quarter. This contributed to a decline in the net

international reserves (NIR) of US$189.0 million to US$1 777.1 million for

the March 2012 quarter.

The WASR of the US dollar vis-á-vis the Jamaica Dollar depreciated by

0.80 per cent for the review quarter to J$87.30 = US$1.00 at end-March

2012. This was in comparison to a depreciation of 0.34 per cent in the

December 2011 quarter. The overall decline in the value of the domestic

currency, for the quarter, reflected depreciations of 0.27 per cent, 0.26 per

cent and 0.28 per cent in January, February and March, respectively (see

Figure 2.15). For FY2011/12, the value of the Jamaica Dollar depreciated

by 1.8 per cent vis-à-vis the US dollar, relative to an appreciation of 4.2 per

cent in FY2010/11.

Changes in the measures of foreign exchange market volatility were mixed.

The standard deviation of daily returns from holding US dollars declined

compared to the preceding quarter (See Figure 2.17). However, the average

bid-ask spread expressed as a percentage of the buying rate increased when

compared with the same measure for the previous quarter (see Figure 2.18).

The average weekly trading range for the selling rate was largely

unchanged (see Figure 2.16).18

The Bank estimates that NPC inflows declined by US$308.7 million,

relative to the previous quarter. NPC inflows were, however, nearly

sufficient to finance the demand for BOP current account transactions (see

Table 2.18). Notwithstanding this outturn, the pressures that emerged

during the quarter reflected periods when the demand to finance current

18 The trading range for the exchange rate is an indicator of risk or uncertainty. It is the difference

between the high and low quotes for the sale of US dollars over a particular period. A narrowing of

the spread is an indicator of more stable conditions in the foreign exchange market.

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

0.00

0.05

0.10

0.15

0.20

0.25

J$ =

US

$1

Quarter

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

Pe

r c

en

t (%

)

Quarter

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Per

cen

t (%

)

Month

0.00900.00950.01000.01050.01100.01150.01200.01250.01300.01350.0140

Per

cen

t (%

)

Quarter



Table 2.18

* BOJ estimates of cash flows within the private domestic economy

Table 2.19

account transactions exceeded NPC inflows. Portfolio

inflows were constrained by increased investor

uncertainty regarding the status of an IMF programme.

In addition, there was heightened Jamaica Dollar

liquidity associated with the net maturity of a local currency denominated

GOJ bond in February. This liquidity reduced the need to convert foreign

currency to meet the seasonal tax payments and other obligations in March.

The Bank estimates that there was, however, a US$463.8 million decline in

foreign currency demand to satisfy BOP current account transactions,

relative to the December 2011 quarter. This was largely related to a

seasonal decline in payments for imports of consumer goods and raw

materials. In addition, foreign currency inflows were buoyed by a seasonal

uptick in earnings from tourism as well as higher revenue from sugar and

non-traditional exports, relative to the previous quarter. These changes

coincided with a 2.9 per cent increase in average per diem purchases by the

authorized dealers to US$29.1 million. Concurrently, average per diem

sales increased by 13.8 per cent to US$30.7 million, relative to the

preceding quarter.

To moderate the intermittent pressures that emerged in the foreign

exchange market during the quarter, the Bank sold a total of US$102.1

million, of which US$68.3 million (net) was sold in January and US$33.8

million (net) in March. At end-March 2012, the NIR was US$1 777.1

million, a decline of US$189.0 million, relative to end-December 2011 (see

Table 2.19). The Bank’s gross reserves at end-March 2012 amounted to

US$2 638.9 million, representing 17.0 weeks of projected goods and

services imports. This compared favourably with the international minimum

benchmark of 12.0 weeks (see Figure 2.19).

Net International Reserves (US$MN)

Month Stock One Month

Change

Oct – 11 2 032.2 -48.4

Nov – 11 1 961.7 -70.4

Dec – 11 1 966.1 4.4

Jan – 12 1 882.6 -83.5

Feb – 12 1 874.7 -8.0

Mar – 12 1 777.1 -97.5

Foreign Exchange Cash Flows*

US$MN

Change Relative

to Previous 2011 2011 2012

Jan –

Mar

Oct –

Dec

Jan –

Mar

Quarter Year

Net Current Inflows -451.0 -741.8 -278.0 463.8 173.0

Current Inflows 874.6 915.7 1 051.4 135.7 176.8

Current Outflows 1 325.6 1 657.5 1 329.4 -328.1 3.8

Net Private Capital Inflows

Balance

650.3 582.9 274.2 -308.7 -376.0

199.3 -158.9 -3.8 155.1 -203.1

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

$M

N

Quarter

Gross ReservesWks of Goods and Services ImportsMinimum Reserves Benchmark

Figure 2.19 Gross Reserves and Weeks of Goods

and Services Imports


Real Sector Developments

31

Figure 3.1

GDP Growth: Tradable vs. Non-Tradable Industries

(12-Month Change)

Table 3.1

The pace of economy recovery slowed in the March 2012 quarter.

Real Gross Domestic Product (GDP) is estimated to have increased

marginally within the range of 0.0 per cent to 1.0 per cent for the March

2012 quarter. This followed average quarterly growth of 1.5 per cent

for 2011. Economic expansion within the review period mainly reflected

estimated increases in Agriculture, Forestry & Fishing, Manufacture,

Electricity & Water Supply and Transport, Storage & Communication.

However, the impact of the growth in these industries was tempered by

contractions in Finance & Insurance Services and Mining &

Quarrying. The marginal growth in the economy was mirrored

primarily in the improvement in Net External Demand as the other

components of aggregate demand were estimated to have declined or

remained flat in the review period.

For FY2011/12 economic activity is estimated to have expanded within

the range of 1.0 per cent to 1.5 per cent in comparison to an average

decline of 1.6 per cent over the previous two fiscal years.

Aggregate Supply

The economy is estimated to have grown in the range of 0.0 per cent to

1.0 per cent for the March 2012 quarter, relative to the expansions of 1.6

per cent in both the March 2011 and December 2011 quarters. This

decelerated pace of growth occurred in the context of continued weak

domestic demand conditions, influenced in part by increased

unemployment in 2011 and a contraction in real wages in the December

2011 quarter. Additionally, external demand, although improved,

remained weak. However, domestic demand conditions were impacted

positively by steady growth in remittance inflows to Jamaica.

Marginal expansions were reflected in both tradable and non-tradable

industries during the review period (see Figure 3.1). Growth in the non-

tradable industries was primarily reflected in Agriculture, Forestry &

Fishing, Construction and Electricity & Water Supply. Expansion

within the tradable industries was driven by growth in Transport,

Storage & Communication and Manufacture (see Table 3.1).

Agriculture, Forestry & Fishing is estimated to have expanded

moderately in the March 2012 quarter, relative to robust growth of 13.7

per cent in the March 2011 quarter and average quarterly growth of 10.6

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

Per

cent

Quarter

Tradable

Sectoral Contribution to Growth

March 2012 Quarter

Estimated Impact on

Growth

GOODS +ve

Agriculture, Forestry & Fishing +ve

Mining & Quarrying -ve

Manufacture +ve

Construction +ve

SERVICES +ve

Electricity & Water Supply +ve

Wholesale & Retail Trade, Repairs &

Installation +ve

Hotels & Restaurants +ve

Transport Storage & Communication +ve

Financing & Insurance Services -ve

Real Estate, Renting & Business Activities +ve

Producers of Government Services -ve

Other Services +ve

Financial Intermediation Services Indirectly

Measured -ve

TOTAL GDP +ve

3. Real Sector Developments



32

Figure 3.2 Domestic Crop Production

(12-Month Change)

Sources: Bank of Jamaica, Ministry of Agriculture

Figure 3.3 Total Electricity Generation & Water Production

(12-Month change)

Sources: Jamaica Public Service & National Water Commission

Figure 3.4 Total Domestic Cargo Movements and Cruise passenger arrivals

(12-Month change)

Source: Port Authority of Jamaica

per cent for the four quarters of 2011. The industry’s performance

reflected growth in domestic agriculture and continued recovery in

export agriculture. Preliminary data indicated expansion of 7.5 per cent

for domestic crop production in the March 2012 quarter, below average

quarterly expansion of 19.0 per cent in 2011 (see Figure 3.2). This

slowdown reflected normalization following exceptional efforts made to

resuscitate the sector after the impact of Tropical Storm Nicole in the

latter part of 2010. The expansion in domestic production reflected a

marginal improvement in productivity, measured as output per hectare,

to 13.7 in the review quarter from 13.6 in the March 2011 quarter. The

estimated expansion in export agriculture reflected growth in coffee,

sugar cane milled, and cocoa of 156.0 per cent, 26.1 per cent, and 36.6

per cent, respectively. Growth in coffee exports was attributed to a

rebound in demand from Japan and increased exports to China.

However, coffee export remained below pre-crisis levels. The expansion

in sugar cane milled reflected increased capacity utilization and

efficiency stemming from the reopening of one sugar factory and

general rehabilitation of plant and equipment, respectively, within the

industry. Cocoa production grew as a result of the Government’s

initiative to resuscitate the industry, which has resulted in improved

yields.

For the review quarter, Electricity & Water Supply is estimated to have

recorded a fifth consecutive period of growth. The outturn primarily

reflected increases of 0.5 per cent and 0.5 per cent in electricity

generation and water production, respectively. The expansion in

electricity generation occurred in the context of modestly greater

demand for industrial electricity while increased water production

represented the partial completion of the National Water Commission’s

Water Supply Improvement Projects (see Figure 3.3).

Following two consecutive quarters of decline, Transport, Storage &

Communication is estimated to have recorded marginal growth in the

review quarter. The industry’s performance primarily reflected

expansions in Transport. Growth in Transport was primarily due to an

improvement in water transport as air transportation is estimated to have

contracted. The improvement in water transportation was partly

attributed to an increase of 67.0 per cent in cruise passenger arrivals, the

impact of which was partially offset by a decline of 1.4 per cent in

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

Per

cent

Quarter

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

Per

cent

Quarter

Gross Electricity GenerationWater Production

-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



33

Figure 3.5 Trends in Alumina &Total Bauxite Production

(12-Month Change)

Source: Jamaica Bauxite Institute

Figure 3.6 Total Stop-over Visitor Arrivals & Visitor Expenditure

(12-Month Change)

Source: Jamaica Tourist Board

domestic cargo movements. Increased cruise passenger arrivals continue

to reflect the opening of the Falmouth Pier in March 2011. Lower cargo

movements resulted from a slowdown in global trade (see Figure 3.4).

For the third consecutive quarter Manufacture is estimated to have

expanded, albeit at a slower pace than the average quarterly growth of

3.4 per cent for the second half of 2011. Expansions were estimated for

both Food & Beverages and Other Manufacturing. Within Food &

Beverages, higher output is estimated primarily for Sugar & Molasses

while the expansion in Other Manufacturing mainly reflected greater

production of chemical products, particularly ethanol.

Construction is estimated to have grown for the fourth consecutive

quarter in line with the average quarterly expansion of 0.6 per cent for

2011. The estimated growth is associated with the continuation of

infrastructural development programmes such as Jamaica Development

Infrastructure Programme, road improvement projects financed through

the Road Maintenance Fund as well as activities to rehabilitate and

protect the Palisados shoreline. Additionally, residential construction

expanded in the review period based on preliminary estimates of an

increase of 67.5 per cent in housing starts from the National Housing

Trust, relative to the corresponding period in 2011.

Following seven consecutive quarters of growth, Mining & Quarrying

is estimated to have contracted in the review period. The decline in the

quarter was attributed to lower capacity utilization in the alumina and

bauxite industries of 42.1 per cent and 91.7 per cent, respectively,

relative to 44.7 per cent and 100.0 per cent in the March 2011 quarter.

Lower capacity utilization in the alumina industry was attributed to a

disruption in production due to electrical and mechanical difficulties at

one alumina plant. Reduced capacity utilization in bauxite production

was attributed to loss of man-hours due to protests during the review

quarter. In this context, total bauxite and alumina production declined

by 7.7 per cent and 5.2 per cent, respectively, for the review quarter (see

Figure 3.5).

-80.0

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

Per

cent

Quarter

Alumina

-10.0

-5.0

0.0

5.0

10.0

15.0

Per

cent

Quarter

Stop Over Visitor Arrivals

Visitor Expenditure



34

Figure 3.7 Trends in Exports and Imports

Source: BOJ & STATIN

Figure 3.8 Production & Consumption Tax, Direct Investment and Capital Goods

Imports

(12-Month Change)

Source: BOJ & STATIN

In the context of lower airlifts to the Island and warmer winter

conditions in the main source markets relative to the comparable period

of 2011, Hotels & Restaurants is estimated to have expanded

marginally in the review quarter. While Restaurants is estimated to have

grown moderately Hotels declined marginally during the quarter. The

estimated decline in Hotels reflected contractions of 0.3 per cent in stop-

over visitor arrivals, relative to the corresponding quarter in 2011. There

was, however, an increase of 1.7 per cent in visitor expenditure (see

Figure 3.6). The marginal growth in Restaurants was attributed to weak

demand for restaurant services given the level of unemployment and

low real disposable income.

Aggregate Demand

Estimates of aggregate spending suggest a marginal increase in

aggregate demand for the March 2012 quarter. This modest growth was

driven primarily by improvements in Net External Demand as Gross

Fixed Capital Formation and Public Consumption are estimated to

have declined while Private Consumption remained flat.

The improvement in Net External Demand emanated from an estimated

increase of 5.8 per cent in exports of goods and services and reduced

demand for imports of goods and services of 5.9 per cent (see Figure 3.7). The performance of exports mainly reflected increases of 1.5 per

cent and 346.9 per cent in alumina and ethanol exports, respectively.

Additionally, coffee, cocoa and sugar grew by 165.9 per cent, 36.6 per

cent and 24.6 per cent, respectively. These increases were attributed to

greater demand in the respective markets and the impact of intensified

marketing activities. The overall contraction in imports was mainly

attributed to declines of 16.8 per cent and 13.7 per cent in raw material

imports and fuels, respectively, due to lower investment activities

associated with the uncertainty in the domestic economy during the

quarter.

Gross Fixed Capital Formation declined marginally in the review

quarter, relative to the corresponding period of 2011. The decline in

investment spending was reflected in a contraction in public investment,

the impact of which was partly offset by growth in private investment.

The estimated contraction in public investment reflected a decline of

30.6 per cent in Central Government’s capital expenditure due to fiscal

constraints. Growth in private investment was inferred from increases of

-100.0

-50.0

0.0

50.0

100.0

150.0

200.0

J$ M

n

Quarter

Imports Exports Net Exports

-80.0

-60.0

-40.0

-20.0

0.0

20.0

40.0

Per

cent

Quarter

Direct investment (J$Mn)

Production & Consumption Tax (J$Mn)

Capital Goods Import (J$Mn)



35

Figure 3.9 Government Recurrent Expenditure (less interest payments)

Figure 3.10 Indicators of Spending

29.0 per cent and 1.4 per cent, respectively, in foreign direct investment

and capital goods imports, the impact of which was partly offset by a

marginal decline of 0.4 per cent in production & consumption tax

receipts (see Figure 3.8). Growth in foreign direct investment was

driven primarily by capital expenditure in the mining and sugar

industries as well as spending for Highway 2000 projects.

For the second consecutive quarter, there was a moderate decline in

Government Consumption. The contraction reflected declines of 8.4

per cent in Government recurrent expenditure (less interest payments),

relative to the corresponding quarter in 2011. Lower expenditure

reflected the continuation of fiscal consolidation (see Figure 3.9).

For the March 2012 quarter, Private Consumption is estimated to have

remained flat, due to the persistence of weak domestic demand. This

performance was reflected in relatively weak disposable income

associated with the increasing trend in unemployment as well as the

decline in real wages in the previous quarter. Two indicators of

consumption spending, consumption tax receipts and total credit card

transactions increased by 3.4 per cent and 11.0 per cent, respectively, in

the review period. However, the impact of these expansions was offset

primarily by a decline of 4.7 per cent in consumer goods imports during

the period, another indicator of spending (see Figure 3.10).

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

Jun

-07

Sep

-07

Dec-0

7

Mar-0

8

Jun

-08

Sep

-08

Dec-0

8

Mar-0

9

Jun

-09

Sep

-09

Dec-0

9

Mar-1

0

Jun

-10

Sep

-10

Dec-1

0

Mar-1

1

Jun

-11

Sep

-11

Dec-1

1

Mar-1

2

Per

cent

Quarter

Government Recurrent Expenditure

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

Per

cent

Quarter

Consumption Tax Receipts

Total Credit Cards

Transaction


Inflation 36

Figure 4.1 Quarterly Inflation Rate

0.0

0.5

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

%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

30

Quarterly (%)12 month (%)

Annual % PTP Quarter % PTP

Source: STATIN

Figure 4.3 Geographical Distribution of Inflation and Share

1.86

1.47 1.50

0.90

0.47

0.24

GKMA OUC RUA

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

Source: STATIN & BOJ

Headline inflation for the March 2012 quarter was 1.7 per

cent. This outturn was within the Bank’s forecast range but

higher than the outturn for the December 2011 quarter. The

inflation outturn for the March 2012 quarter was primarily

influenced by higher imported inflation, seasonal price

adjustments and constrained industrial supplies. The impact

of these impulses was partially offset by improvements in the

production of some domestic agricultural items and relatively

weak but improving domestic demand. For FY2011/12, the

inflation outturn was 7.3 per cent which was well within the


Trends in Headline Price Indices

Inflation, as measured by changes in the All Jamaica Consumer

Price Index (CPI), was 1.7 per cent for the March 2012 quarter,

which was higher than the 1.3 per cent recorded in the December

2011 quarter. The inflation outturn in the review quarter was,

however, within the Bank’s forecast range of 1.0 per cent to 2.0

per cent as outlined in the December 2011 report. The outturn

was also generally in line with the 1.8 per cent average inflation

for the previous five March quarters, excluding the March 2011

quarter.19

During the review quarter, the highest monthly

movement of 0.8 per cent was recorded in February, while prices

increased by 0.5 per cent in January and March (see Figure 4.1

and 4.2).

For FY2011/12, inflation was 7.3 per cent, which was within the

Bank’s target range of 6.0 per cent to 8.0 per cent and lower than

the outturn of 7.8 per cent for FY2010/11. Food & Non Alcoholic Beverages (FNB) and Housing, Water, Electricity, Gas & Other Fuels (HWEG) accounted for approximately 69.0

per cent of the inflation in FY2011/12. FNB primarily reflected

higher prices for processed foods as well as significant price

increases for vegetable items. Inflation within HWEG was

largely due to higher electricity cost associated with the increase

in crude oil prices.

19

This five-year average excludes the March 2011 quarter when

prices fell sharply as a result of excessive domestic food supplies

as the agricultural sector recovered from Tropical Storm Nicole.

44.. IInnffllaattiioonn


Inflation 37

Figure 4.4 Annual Trends in Core Inflation

0

2

4

6

8

10

12

14 12-month (%)

CPI-AF

CPI-FF

TRIM

Source: BOJ

Figure 4.5 Inflation by Division

1.72

1.10

2.27

2.44

1.15

0.33

1.74

0.00

0.94

0.00

0.95

2.40

FNB

ATB

CF

HWEG

FHERM

HLTH

TRAN

COM

R&C

ED

R&H

MIS

3.95

0.09

0.46

1.92

0.35

0.07

1.37

0.00

0.19

0.00

0.36

1.24

Actual Share x 10

Blue bars = positive

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

Regional Inflation

During the review quarter, inflation was highest in Greater

Kingston & Metropolitan Area (GKMA) with Other Urban

Centers (OUC) representing the next largest contributing region

(see Figure 4.3). Inflation in GKMA was primarily due to

sharper movements in the price for most food items relative to

the corresponding changes observed in the other regions. There

was also a larger increase in Miscellaneous Goods & Services (MIS) within GKMA.

Underlying Inflation

For the March 2012 quarter, the three core measures, CPI

without Food & Fuel (CPI-FF), CPI without Agriculture & Fuel

(CPI-AF) and the Trimmed Mean (TRIM), were unchanged at

1.2 per cent, 1.6 per cent and 1.0 per cent, respectively, relative

to the December 2011 quarter. Consistent with the developments

in the review quarter, the 12-month point-to-point measures of

core inflation remained generally stable (see Figure 4.4 and Appendix). At end March 2012, the 12-month CPI-FF, CPI-AF

and TRIM were 5.7 per cent, 7.0 per cent and 4.3 per cent,

respectively.

Main Factors

One of the principal factors contributing to inflation during the

March 2012 quarter was rising energy costs on the international

market which was reflected in higher costs for processed foods,

electricity generation and transportation. In addition, mild local

drought conditions led to a reduction in the supplies of

vegetables relative to seasonal levels, which prompted some

price increases during the review quarter. Inflationary pressures

during the review quarter also emerged from some seasonal price

increases. While some indicators of consumer demand reflected

improvements, relative to the previous quarter, there continued to

be generally weak demand conditions underpinned by high

unemployment and declining real wage. Additionally, despite

some drift in the exchange rate, there was no significant effect on

estimates of domestic prices.


Inflation 38

Figure 4.6 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)

WTI

Fuel

Source: STATIN, Bloomberg

Figure 4.7 Monthly End of Period Exchange Rate (JMD per USD)

85.0

85.5

86.0

86.5

87.0

87.5

J$ per US$

EOP ExRate

Average

Source: BOJ

Figure 4.8

Import Value (monthly c.i.f)

0

50

100

150

200

250

300

350

400

450US$Million

Real Import Value

Polynomial Trend

Source: STATIN

International Commodity Prices

During the March 2012 quarter, inflation was largely induced by

rising international oil prices as average grain prices were lower

when compared to the December 2011 quarter. In particular, the

benchmark West Texas Intermediate (WTI) crude oil price

increased by 9.4 per cent when compared to the 4.8 per cent in

the December 2011 quarter (see Figure 4.6 and International Developments). The impact of this increase resulted in higher

costs for processed foods, fuel for electricity generation and

petrol within FNB, HWEG and TRAN, respectively (see Figure 4.5).

The BOJ Grains Price Index declined by 3.4 per cent in the

March 2012 quarter following a 2.8 per cent fall in the December

2011 quarter. The decline in grain prices for the review quarter

reflected a significant contraction in the price of rice which

outweighed increases in the prices of corn and wheat (see

International Developments).20

In this regard, the decline in

index over the past two quarters had a moderating impact on

inflation in the review quarter.

Exchange Rates

The Jamaica Dollar vis-à-vis the US dollar depreciated by 0.8

per cent over the March 2012 quarter, to close at J$87.30:

US$1.00, following a 0.4 per cent depreciation in the December

2011 quarter (see Figure 4.7 and Foreign Exchange Market). The relatively stable exchange rate over the past two quarters did

not have any noticeable impact on domestic prices.

Demand Conditions

Indicators of consumer demand for the March 2012 quarter

reflected some improvement relative to the December 2011

quarter, albeit remaining weak, relative to the pre-crisis period.

The improvement was reflected in estimates of both real

consumer loans and PAYE contributions (see Figures 4.10 and 4.11). Additionally, the narrowing of the output gap since the

December 2011 quarter, may indicate an expansion in demand in

the review quarter (see Economic Outlook and Monetary 20

The Bank’s Grain Index is a composite of the prices of rice, wheat and corn.


Inflation 39

Figure 4.9

Monthly Real Debit and Credit Card Transactions Value

80

100

120

140

160

180

200

220

240

Au

g-0

8

Nov

-08

Fe

b-0

9

Ma

y-…

Au

g-0

9

Nov

-09

Fe

b-1

0

Ma

y-…

Au

g-1

0

Nov

-10

Fe

b-1

1

Ma

y-…

Au

g-1

1

Nov

-11

Fe

b-1

2

J$million

Real Debit & Credit Card TransactionValue

Source: JETS

Figure 4.10

Monthly Real Consumer Loans

450

500

550

600

650

700

Ma

y-08

Au

g-0

8

Nov

-08

Fe

b-0

9

Ma

y-09

Au

g-0

9

Nov

-09

Fe

b-1

0

Ma

y-10

Au

g-1

0

Nov

-10

Fe

b-1

1

Ma

y-11

Au

g-1

1

Nov

-11

Fe

b-1

2

J$million

Real Non-BusinessLoans

Source: BOJ

Figure 4.11 Monthly Real PAYE Contribution

15

20

25

30

35

40

45

50

55

Jun-

06

Oct

-06

Fe

b-0

7

Jun-

07

Oct

-07

Fe

b-0

8

Jun-

08

Oct

-08

Fe

b-0

9

Jun-

09

Oct

-09

Fe

b-1

0

Jun-

10

Oct

-10

Fe

b-1

1

Jun-

11

Oct

-11

Fe

b-1

2

J$million deflated

Real PAYE

Polynomial Trend

Source: GOJ

Figure 4.12 Monthly Industrial Electricity Sales – Productivity Indicator

140

145

150

155

160

165

170

175

180

185

190

Jun

-08

Sep

-08

De

c-08

Mar

-09

Jun

-09

Sep

-09

De

c-09

Mar

-10

Jun

-10

Sep

-10

De

c-10

Mar

-11

Jun

-11

Sep

-11

De

c-11

Mar

-12

billion MwH

Industrial Electricity Sales

12-mth Average

Source: JPSCo.

Policy Perspectives). Despite the signs of improvement in some

indicators, the general weak level of demand would not have

resulted in any significant inflationary pressure. Additionally,

other indicators, such as real value of imports and debit & credit

card transactions reflected declines for the March 2012 quarter

relative to the December 2011 quarter (see Figure 4.8 and 4.9).

Supply Conditions

During the March 2012 quarter, vegetable supplies declined while some starchy food items experienced significant upward

movement. In particular, supplies of the main vegetable items

varied around seasonal levels, while supplies of key starchy food

items, such as Irish and sweet potatoes, reflected significant

expansion above seasonal levels. In this regard, the impact of the

moderate increases in vegetable prices was partially offset by an

average decline in starchy food prices. The annual average

industrial electricity sales, used as an indicator of productive

activity for manufacturers, hotels and distributive traders,

reflected a decrease of 5.2 per cent for the March 2012 quarter

relative to the December 2011 quarter (see Figure 4.12).

Other Price Adjustments

There were seasonal price increases that contributed to the

inflation outturn during the March 2012 quarter. These included

the annual resetting of various fees and rates for several goods

and services. Among these adjustments were higher legal fees

and insurance rates for motor vehicles as well as a negotiated

wage increase for artisans by the Incorporated Masterbuilders

Association of Jamaica.

Summary

The inflation outturn for the March 2012 quarter was 1.7 per

cent, within the Bank’s forecast range of 1.0 per cent to 2.0 per

cent. The outturn was generally in line with seasonal

expectations and occurred in the context of rising import prices,

seasonal price adjustments and weak but improving domestic

demand. The effects of these factors were, however, moderated


Inflation 40

by the impact of improvements in the supply of some domestic

agriculture commodities and steady inflation expectations

anchored by relatively stable exchange rate.


Economic Outlook and Monetary Policy Perspectives

41

Table 5.1

Jamaica: Selected

Economic Indicators

Outturn

for

FY2011/12

Projections

for Jun’ 12

Quarter

Projections

for

FY2012/13

Inflation

(% change)

7.3 1.5 to 2.5 6.0 to 8.0

Net

International

Reserves

1 777.2 1 891.6 1 780.3

Gross

Reserves

(US$MN

e.o.p.)

2 639.0 2 753.4 2 642.1

Weeks of

Imports of

Goods and

Services

17.3 17.3 16.6

GDP

(% change)

1.0 to 2.0 0.5 to 1.5 0.0 to 1.0

Output growth and inflation should be largely similar to

the results of the previous quarter.

The outlook for the Jamaican economy is conditioned by the

forecast for global growth and an expectation of continued fiscal

restraint in the domestic economy. While the forecast for global

growth in 2012 has improved relative to the projection in the

December 2011 quarter, the expected expansion is still below the

outturn for 2011. The revised outlook for global growth mainly

reflects the expectation for higher growth for the economy of the

United States of America. This more optimistic outlook for global

growth should result in moderate increases in commodity prices

over the fiscal year.

In this context, Jamaica’s output is projected to grow in the range

of 0.5 per cent to 1.5 per cent for the June 2012 quarter. This

performance should result primarily from growth in Agriculture,

Forestry & Fishing, Construction & Installation and Electricity &

Water Supply.

Domestic inflation is forecasted to be in the range of 1.5 per cent to

2.5 per cent for the June 2012 quarter. This projection is

underpinned by the assumption for relatively stable imported

inflation, domestic inflation expectations and domestic capacity

conditions.

For FY2012/13, domestic output should expand in the range of 0.0

per cent to 1.0 per cent and inflation should be in the range of 6.0

per cent to 8.0 per cent. However, continued fiscal consolidation,

including tax reforms, presents a risk to this forecast. In this

context, the Bank will continue its policy strategies to ensure the

maintenance of a stable macroeconomic environment.

Outlook - June 2012 Quarter Inflation Domestic inflation, as measured by the change in the consumer

price index (CPI) is forecasted in the range of 1.5 per cent to 2.5

per cent for the June 2012 quarter.21

21 The 5-year average inflation rate for a June quarter, excluding the June 2008 quarter, is

2.4 per cent. June 2008 was excluded given that quarter’s unusually high inflation,

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

5. EEccoonnoommiicc OOuuttllooookk aanndd MMoonneettaarryy PPoolliiccyy PPeerrssppeeccttiivveess


Economic Outlook and Monetary Policy Perspectives 42

Figure 5.1 Trends in Changes in Exchange Rate and Headline

Inflation

International commodity prices are projected to

decline in the June 2012 quarter.

This follows inflation of 1.7 per cent recorded for the March 2012

quarter. The projected inflation rate in the June 2012 quarter is

underpinned by a forecast for relatively stable imported inflation,

domestic inflation expectations and capacity conditions.

Imported Inflation

Imported prices are not projected to have a significant impact on

inflation in the June 2012 quarter. This is in the context of

expected changes in imported prices being projected to be lower

than the average increase of 6.0 per cent in the five previous June

quarters.22

In particular, oil prices should be relatively unchanged

for the June quarter reflecting the impact of the slight easing of

geopolitical tensions related to Iran’s nuclear programme being

largely offset by the effect of the improved outlook for the

economy of the USA. Additionally, oil prices should reflect the

impact of the downward revision of the growth forecast for China

as well as continuing concerns about the European economies.

With respect to agricultural commodities, the prices of corn and

wheat are expected to decline by approximately 3.0 per cent and

2.0 per cent, respectively, for the quarter. These projections are

consistent with increased optimism regarding supplies in major

grains producing countries.

The price of the Jamaica Dollar vis-à-vis the US dollar is expected to

remain relatively stable in the June 2012 quarter. This is in a context

of the forecast for increased net private capital inflows which should

have a positive impact on the foreign exchange market. These flows

are expected to be sufficient to offset the higher demand associated

with current account transactions. The projected improvement in

private capital inflows reflects normalization from the low levels that

prevailed in the previous quarter.

Domestic Capacity Conditions

Domestic output should largely be in line with potential in the June

2012 quarter, resulting in a smaller output gap than estimated for

22 The imported inflation in the June 2008 quarter also was excluded due to that quarter’s

unusual inflation due to the spike 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



100.0

72.6 70.6 65.8

43.3 41.1 46.9

96.9

112.8 110.2

109.3

107.9

103.3 98.4

97.1

73.4

60.7

61.5

64.8

72.9

67.7 66.3

67.1

64.8

0.0

20.0

40.0

60.0

80.0

100.0

120.0

-0.06

-0.04

-0.02

0

0.02

0.04

0.06

0.08

CPI(%chg) Output gap

Figure 5.2 Trends in Domestic Headline Inflation and the Output

Gap (% change)

Figure 5.3 Index of Inflation Expectations of Businesses

the March 2012 quarter (see Figure 5.2).23

This negligible output

gap would therefore provide minimal impetus for price increases in

the quarter. A positive output gap emerged in the March 2012

quarter as the domestic economy continued to expand over

FY2011/12 and the rate of expansion approached that of the

country’s potential.24

As the economy continues to expand and

experience a relatively stable and favourable macroeconomic

environment, it is forecasted that potential output growth should

return to normal levels by the end of FY2012/13.

Inflation Expectations

The Bank’s survey of business expectations in the March 2012

quarter indicated a slight decline in inflation expectations,

continuing the steady trend since the March 2011 survey (see

Figure 5.3).25

This fall coincides with a trend increase in

businesses’ perception of the Bank’s ability to control inflation.26

Of note, respondents expect utilities to be 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 were fuel/transportation and raw material replacement.

Output For the June 2012 quarter, Jamaica’s output is projected to expand

in the range of 0.5 per cent to 1.5 per cent. This performance is

expected to be driven primarily by Agriculture, Forestry &

Fishing, Mining & Quarrying, Hotels & Restaurants and

Electricity & Water Supply. Contractions are mainly expected for

Transport, Storage & Communication and Finance & Insurance

Services.

Expansion in Agriculture, Forestry & Fishing should be driven by

growth in both export agriculture and domestic agriculture. Export

agriculture should be buoyed by a normalization of citrus

production following the fallout associated with the citrus greening

disease. Cocoa production is projected to increase as a result of the

continued rehabilitation of cocoa fields which is being supported

23 The output gap is calculated as actual output minus potential output.

24 Potential output is measured using a simple linear trend accounting for structural

breaks.

25 Survey was conducted during February and March 2012

26 The perception of inflation control reached the highest level in the survey history in

March 2012.



100.0

122.8 129.8

138.0

122.8

166.9

140.5

119.5

100.0

111.3

95.4

109.0

107.7 117.8

92.3

111.5

160.6

151.8

152.0

154.0

154.9

140.6

147.4

144.4

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

Figure 5.4 Index of Present Conditions of Businesses

Figure 5.5 Index of Future Business Conditions

by the Government. With respect to domestic agriculture, growth is

expected to reflect continued improvement in productivity.

The anticipated growth in Mining & Quarrying is premised on an

increase in capacity utilization in the alumina industry, reflecting

increased efficiency at one alumina plant. Capacity utilization in

the bauxite industry is, however, expected to contract reflecting

normalization of production to average capacity utilization.

Electricity & Water Supply should grow consequent on the

continuation of the National Water Commission’s Water Supply

Improvement Project. In addition, electricity generation is expected

to normalize in the review quarter following contraction in the

comparable period of 2011.27

Transport, Storage & Communication is expected to contract in

the June 2012 quarter given the reduced domestic earnings from air

transport associated with the transfer of ownership of the national

airline to a foreign entity in the September 2011 quarter. The

projected decline for Finance & Insurance Services largely

reflects the continued fall in net interest income.

Despite the projection for continued expansion in domestic output

in the June 2012 quarter, the results of the BOJ’s Survey of

Expectations suggests that businesses perception of the overall

health of the economy had declined. In particular, the index of the

perception of present conditions fell to 136.4 in the March 2012

survey from 157.9 in the December 2011 survey. The index of the

perception of future business conditions recorded a more modest

decline, falling to 144.4 from 147.4. In contrast to these results, the

Jamaica Conference Board’s Survey of Business and Consumer

Confidence for the March 2012 quarter indicated a sharp increase

in both business and consumer confidence. The increases in the

indices for both businesses and consumers were attributed to sharp

increases in perceptions of future prospects for the economy.

27 Electricity production in the June 2011 quarter declined due to a sharp falloff in

demand from both residential and domestic demand.

100.0

119.2

153.4

168.4

155.7

183.1

131.6 121.6

85.1 93.5

62.8

40.0 38.7 48.3 52.9

67.0

95.2

117.6

142.3

132.8

140.2

144.4

157.9

136.4

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0



-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

(%)

Figure 5.6 Consumer Price Index

(Annual point to point change)

Figure 5.7 Inflation Forecast Fan chart (per cent)

Outlook - FY2012/13 Jamaica’s output is projected to expand in the range of 0.0 per cent

to 1.0 per cent for FY2012/13, generally in line with the pace of

growth recorded in the previous fiscal year. Domestic headline

inflation is forecasted to be within the range of 6.0 per cent to 8.0

per cent (see Figure 5.6).

The growth outlook for the Jamaican economy in FY2012/13

reflects the expectation of continued weak domestic demand and a

slower growth in the global economy in 2012 relative to 2011,

albeit a more optimistic outlook when compared to the previous

forecast. The expected improvement in the global economy,

relative to the Bank’s previous projection, reflects the improved

outlook for the US economy. However, while successful reforms

have been undertaken in Greece, there is still significant uncertainty

about the health of some key European economies.

Notwithstanding these concerns, continued expansion in the global

economy bodes well for the external demand for Jamaican goods

and services. Additionally, the improving global environment

could result in an increase in remittance inflows to Jamaica.

Jamaica’s inflation outlook for FY2012/13 is also conditioned by

the possible impact of the global growth prospects as well as other

influences on imported prices. Specifically, the price of grains

should benefit from a general improvement in the weather patterns

experienced by major grains producer given the anticipated

dissipation of La Niña by end April 2012. Oil prices could be

negatively impacted by the improved demand outlook which could

offset the effect of continuing geopolitical risks in oil producing

countries like Iran. This outlook for commodity prices, in the

context of a forecast for relatively stable exchange rate, should

result in a moderate increase in imported inflation over the fiscal

year.

Risks

The risks to the forecast for domestic output are skewed to the

downside. These risks include a larger than anticipated impact of

contractionary fiscal measures implemented by the GOJ in order to

improve long-run fiscal sustainability. Additionally, there is the

0.0

5.0

10.0

15.0

20.0

25.0

30.0

projection actual

target lower bound target upper bound



possibility that adverse weather could impact output since the 2012

Atlantic Hurricane Season is projected to be average.28

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.

The risks to the inflation forecast are skewed to the upside (see

Figure 5.7). These mainly include the possibility of a larger than

expected impact of domestic fiscal policy measures on prices. In

particular, fiscal measures could result in inflation exceeding the

upper end of the forecast range. Additionally, the possible impact

of adverse weather on domestic crop production and a greater than

anticipated impact on oil prices arising from renewed geopolitical

tensions and stronger global could result in the target being

breached. The downside risk largely relates to a weaker than

expected domestic demand constraining potential upward price

impulses.

Monetary Policy

The domestic macroeconomic environment should continue to

display the positive trend displayed over FY2011/12. Output is

projected to continue to expand, prices should record relatively

modest increases and the financial markets should remain relatively

stable. The GOJ is expected to continue its path of fiscal

consolidation which poses some downside risk to output and upside

risk to inflation. In that context, the BOJ will continue its monetary

policy adjustments to ensure the maintenance of a stable

macroeconomic environment.

28 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.


47


Appendices, A. Fiscal Developments 48

A. Fiscal Developments: Preliminary March 2012 Quarter

Provisional data indicate that Central Government recorded a fiscal deficit of $24.3 billion or 1.9

per cent of GDP for the March 2012 quarter relative to the budgeted29

deficit of $16.2 billion or

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

Expenditure as well as a shortfall in Revenue & Grants. The primary surplus was

approximately $13.4 billion or 1.0 per cent of GDP for the quarter compared to the budgeted

surplus of $21.5 billion or 1.7 per cent of GDP. Concurrently, the current deficit was

approximately $9.1 billion or 0.7 per cent of GDP relative to a current deficit of $6.3 billion or

0.5 per cent of GDP implied in the budget (see Table).

Expenditure for the quarter exceeded budget by $6.0 billion and reflected higher than budget

Capital and Recurrent Expenditure. The higher than anticipated Recurrent Expenditure was

reflected in Programmes which exceeded budget by $1.3 billion, the impact of which was partly

countered by lower than budgeted wages and salaries and interest payments. The negative

deviation in Programmes was due to the Government’s increased outlay on operational expenses.

Capital Expenditure was $5.1 billion higher than budget mainly as a result of payments made to

liquidate obligations due to the Road Maintenance Fund and National Works Agency in respect

of the Jamaica Development Improvement Programme (JDIP) as well as to pay arrears for

Clarendon Alumina Partners (CAP) to Alcoa.

Revenue & Grants for the quarter was $2.1 billion below budget, largely reflecting shortfalls in

Tax Revenue and Grants as Capital Revenue exceeded budget. Of note, the deviation in Grants

from budget was due to the non-receipt of EU and other project related funds. The higher than

budgeted Capital Revenue partly reflected a reclassification of revenue previously reflected in

the Non-Tax revenue budget. Tax Revenue primarily reflected lower than budgeted receipts from

International Trade and Production & Consumption. With respect to International trade, the

shortfall reflected lower general consumption tax (GCT) on imports and Customs Duty while

Production & Consumption mainly reflected the deviation in GCT (local).

The C-Efficiency (GCT) ratio of 43.7 per cent for the quarter indicated that tax collections based

on estimated consumption for the quarter was only marginally higher relative to the 5-year

average of 43.5 per cent and also higher relative to 39.8 per cent recorded for the March 2011

quarter. The slight increase might be attributed to the positive albeit slow growth during the

quarter. The C-Efficiency (GCT/SCT) ratio for the quarter of 62.7 per cent was higher than the

29

Budget refers to Second Supplementary

AAppppeennddiicceess



5-year average of 59.0 per cent and also higher than the 57.6 per cent recorded in the

corresponding quarter in the previous fiscal year.

For the March quarter, the Government raised $25.3 billion through the issue of 7 Benchmark

Investment (BMI) notes. Of the total BMI notes issued, 4 were variable rate (VR) instruments

which raised $20.5 billion. For the fiscal year, the Government raised $105.8 billion from 21

instruments of which 10 were FR instruments while 11 were VR instruments. In this regard, VR

debt accounted for 83.4 per cent of the value of total take-up in contrast to the Government’s

debt strategy for a debt issuance of over 90.0 per cent in FR instruments. At end-March 2012, the

weighted average age of new debt was 8.2 years relative to 8.6 years at end-December 2011 and

7.03 years at March 2011. The decline relative to the previous quarter reflects investors’ appetite

for shorter tenor instruments in the current climate of uncertainty.

For the FY 2011/12 Central Government recorded a fiscal deficit of $80.7 billion or 6.2 per cent

of GDP which was $8.1 billion above the budget of $72.6 billion (5.0 per cent of GDP). This

largely reflected lower than budgeted Revenue & Grants as well as higher than budgeted

Expenditure. Revenue & Grants was $2.1 billion below budget reflecting a $1.0 billion

shortfall in Tax Revenue as well as shortfalls in Non-tax Revenue and Grants. Expenditure for

the year exceeded budget by $6.0 billion and reflected higher than budget Capital and Recurrent

Expenditure recorded in the last quarter of the fiscal year.

The primary surplus for the fiscal year of approximately $40.0 billion or 3.1 per cent of GDP

was $8.1 billion lower than budget while the current deficit of $41.5 billion or 3.2 per cent of

GDP was $2.9 billion higher than anticipated in the budget.



CENTRAL GOVERNMENT SUMMARY ACCOUNTS

FY 2011/12 (J$MN)

FY 2011/12

Q4 2nd Supp

Q4 Variance % FY 2011/12

Q1- Q4 2nd Supp Q1 - Q4 Variance %

Revenue & Grants 91 086.9 93 169.8 -2 082.9 -2.2 322 457.5 324 540.2 -2 082.7 -0.6

Revenue 90 948.6 91 367.1 - 418.4 -0.5 319 008.8 319 427.0 -418.2 -0.1

Tax Revenue 83 612.1 84 638.2 -1 026.1 -1.2 289 882.2 290 908.3 -1 026.1 -0.4

Non-Tax Revenue 4 889.2 5 806.7 - 917.5 -15.8 17 016.8 17 934.2 - 917.4 -5.1

Bauxite Levy 355.4 361.6 - 6.3 -1.7 1 524.6 1 530.8 - 6.2 -0.4

Capital Revenue 2 091.9 560.6 1 531.4 273.2 10 585.2 9 053.7 1 531.5 16.9

Grants 138.2 1 802.7 -1 664.4 -92.3 3 448.7 5 113.2 -1 664.5 -32.6

Expenditure 115 410.0 109 405.1 6 004.9 5.5 403 191.6 397 186.7 6 004.9 1.5

Recurrent Expenditure 98 001.3 97 084.6 916.7 0.9 349 960.7 349 044.0 916.7 0.3

Programmes 26 406.8 25 136.2 1 270.6 5.1 89 699.4 88 428.8 1 270.6 1.4

Wages & Salaries 33 876.6 34 219.9 - 343.3 -1.0 139 556.9 139 900.2 - 343.3 -0.2

Interest 37 717.9 37 728.5 - 10.6 0.0 120 704.4 120 715.0 - 10.6 0.0

Domestic 31 608.7 31 628.3 - 19.6 -0.1 81 617.3 81 636.9 - 19.6 0.0

Foreign 6 109.2 6 100.2 9.0 0.1 39 087.1 39 078.1 9.0 0.0

Capital Expenditure 17 408.7 12 320.5 5 088.2 41.3 53 230.9 48 142.7 5 088.2 10.6

Non-interest expenditure 77 692.1 71 676.6 6 015.5 8.4 282 487.3 276 471.7 6 015.6 2.2

Fiscal Balance -24 323.1 -16 235.4 -8 087.7 49.8 -80 734.1 -72 646.5 -8 087.6 11.1

Current Balance -9 144.6 -6 278.1 -2 866.5 45.7 -41 537.1 -38 670.7 -2 866.4 7.4

Primary balance 13 394.8 21 493.1 -8 098.4 -37.7 39 970.3 48 068.5 -8 098.2 -16.8

In Percent of GDP

BR -1.9 -1.3 -6.2 -5.6

CB -0.7 -0.5 -3.2 -3.0

PB 1.0 1.7 3.1 3.7

IP 2.9 2.9 9.3 9.3

FSR -1.3 -1.2 -1.3 -1.2

NIE -0.9 -0.9 -0.8 -0.8

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

NIE = Non-Interest Expenditure as a per cent of GDP

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.



Government New Issues

FY 2010/11 vs 2011/12J$ millions

New Debt

Raised # of Issues

% of Total

Issues

New Debt

Raised # of Issues

% of Total

Issues

Variable Rate 1,298.00 1 1.15 Variable Rate 88,273.28 11 83.44

Fixed Rate 111,258.00 22 98.85 Fixed Rate 17,519.49 10 16.56

US$ Linked 0.00 0 0.00 US$ Linked 0.00 0 0.00

112,556.00 23 105,792.77 21

Total 112,556.00 23 100.00 Total 105,792.77 21 100.00

Variable Rate 0.00 Variable Rate 9,176.29

Fixed Rate 64,638.37 Fixed Rate 32,987.97

US$ Linked 0.00 US$ Linked 0.00JDX elligible called bonds 5,000.00 JDX elligible called bonds 0.00

69,638.37 42,164.26

Above 5 34,610.31 13 30.75 Above 5 74,050.00 13 70.00

5 and Below 77,945.69 10 69.25 5 and Below 31,742.77 8 30.00

Total 112,556.00 23 100.00 Total 105,792.77 21 100.00

FR J$ Long-term 34,610.31 13 30.75 FR J$ Long-term 11,485.87 7 10.86

2009/10 2010/11 2011/12

Age of New Debt

Simple Average 3.3 11.5 10.3

Weighted Average 3.0 7.0 8.2

Maturities Maturities

Maturity Profile of New Debt Maturity Profile of New Debt

2010/11 2011/12

April - March April - March

New Debt Issued New Debt Issued


Appendices, B. Monetary Policy Developments 52

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.


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


liabilities reduced from fourteen per cent (14%) to thirteen per cent (13%).


in the dual liquid asset ratios of five per cent and thirty-one per cent (5% and 31%) for Building

Societies.


in dual cash reserve ratios of one per cent and thirteen per cent (1% and 13%) in respect of local and


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.


liabilities reduced from thirty-one per cent (31%) to thirty per cent (30%).


liabilities reduced from thirteen per cent (13%) to twelve per cent (12%).


in the dual liquid asset ratios of five per cent and thirty per cent (5% and 30%) for Building Societies.


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


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.




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.





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




liabilities reduced from twelve per cent (12%) to eleven per cent (11%).


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

Societies.


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





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%).


liabilities reduced from eleven per cent (11%) to ten per cent (10%).


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

Societies.


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


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.



and 14.00 per cent, respectively.



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


09/10/2002 Interest rates on Bank of Jamaica 90-day and 120-day open market instruments were increased from


28/10/2002 Interest rates on Bank of Jamaica 90-day and 120-day open market instruments were reduced from




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.


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.



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.


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.



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.





















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.





instruments were reduced to 12.15 per cent, 12.2 per cent, 12.30 per cent, 12.35 per cent and 12.50 per

cent, respectively.






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:


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


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 71

…

LIST OF SUMMARY TABLES

Table Page

1 Inflation Rates 70 2A Component Contribution to Inflation 71 2B Regional Inflation 72 3 Bank of Jamaica Operating Targets 73 4 Monetary Aggregates 73 5 Components and Sources of Change in Local Currency Money Supply 74 6A Commercial Banks’ Selected Interest Rates 75 6B GOJ Treasury Bill Yields 76 7 Bank of Jamaica Open Market Interest Rates 77 8A Jamaica: Government Bond Market GOJ Domestic Market Maturities 78 8B Jamaica: Government Bond Market GOJ Domestic Market Issues 79

9 External Trade - Goods Exports (f.o.b.) 80 10 Balance of Payments Summary 81 11 Foreign Exchange Selling Rates 82 12 Bank of Jamaica: Net International Reserves 83 13 Jamaica Stock Exchange Activities 84 14 Public Sector Domestic Securities 85 15 Production of Selected Commodities 86 16A Quarterly GDP: Value Added by Industry (seasonally unadjusted) 87

16B Quarterly GDP: Value Added by Industry (seasonally adjusted) 87 D. Bank of Jamaica Balance Sheet 88

E. Commercial Banks’ Balance Sheet 89 F.1 International Indicators:- London Interbank Offer Rate – LIBOR 90 2 London Money Rates-Interbank Sterling 91 3 Prime Lending Rates 92

4A International Exchange Rate US$ vs Other Major Currencies 93 4B International Exchange Rates Exchange Cross Rates 93

4C International Exchange Rates Sterling vs Other Major Currencies 93 5A World Commodity Prices- Key Crude Oil Price 94 5B World Commodity Prices- Food 94 6 Major Stock Market Indices 94



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



2A

COMPONENT CONTRIBUTION TO INFLATION All Jamaica


Divisions, Classes and Groups

Weight in CPI

Inflation

(%)

Weighted Inflation

Contribution

(%)

FOOD & NON-ALCOHOLIC BEVERAGES 0.3746 1.72 0.64 39.48

Food 0.3512 1.69 0.59 36.42

- Bread and Cereals 0.0610 1.01 0.06 3.80

- Meat 0.0766 2.56 0.20 12.05

- Fish and Seafood 0.0533 2.08 0.11 6.81

- Milk, Cheese and Eggs 0.0311 1.72 0.05 3.29

- Oils and Fats 0.0164 3.27 0.05 3.30

- Fruit 0.0114 -0.81 -0.01 -0.57

- Vegetables and Starchy Foods 0.0686 0.72 0.05 3.02

- Sugar, Jam, Honey, Chocolate and Confectionery 0.0172 1.82 0.03 1.92

- Food Products n.e.c. 0.0155 2.48 0.04 2.37

Non-Alcoholic Beverages 0.0235 2.28 0.05 3.29

- Coffee, Tea and Cocoa 0.0066 3.78 0.02 1.53

- Mineral Waters, Soft Drinks, Fruit and Vegetable Juices 0.0169 1.76 0.03 1.82

ALCOHOLIC BEVERAGES AND TOBACCO 0.0138 1.10 0.02 0.93

CLOTHING AND FOOTWEAR 0.0333 2.27 0.08 4.64

Clothing 0.0212 2.25 0.05 2.93

Footwear 0.0122 2.20 0.03 1.65

HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 0.1276 2.44 0.31 19.16

Rentals for Housing 0.0352 1.00 0.04 2.17

Maintenance and Repair of Dwelling 0.0080 3.80 0.03 1.87

Water Supply and Miscellaneous Services Related to the Dwelling 0.0132 1.71 0.02 1.39

Electricity, Gas and Other Fuels 0.0712 3.12 0.22 13.67

FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTINE HOUSEHOLD MAINTENANCE

0.0493 1.15 0.06 3.49

Furniture and Furnishings 0.0069 1.74 0.01 0.74

Household Textiles 0.0032 1.36 0.00 0.27

Household Appliances 0.0056 2.16 0.01 0.74

Glassware, Tableware and Household Utensils 0.0005 2.08 0.00 0.06

Tools and Equipment for House and Garden 0.0015 0.76 0.00 0.07

Goods and Services for Routine Household Maintenance 0.0316 0.83 0.03 1.62

HEALTH 0.0329 0.33 0.01 0.68

Medical Products, Appliances and Equipment 0.0122 0.53 0.01 0.40

Health Services 0.0207 0.31 0.01 0.40

TRANSPORT 0.1282 1.74 0.22 13.70

COMMUNICATION 0.0399 0.00 0.00 0.01

RECREATION AND CULTURE 0.0336 0.94 0.03 1.94

EDUCATION 0.0214 0.00 0.00 0.00

RESTAURANTS & ACCOMMODATION SERVICES 0.0619 0.95 0.06 3.61

MISCELLANEOUS GOODS AND SERVICES 0.0837 2.40 0.20 12.37

ALL DIVISIONS 1.0000 1.69 1.63 100.00



2B

REGIONAL INFLATION January – March 2012

Divisions, Classes and Groups

GKMA

Other Urban

Centres

Rural Areas

FOOD & NON-ALCOHOLIC BEVERAGES 2.32 1.17 1.49

Food 2.26 1.13 1.50

- Bread and Cereals 1.89 0.90 0.66

- Meat 4.87 1.48 1.27

- Fish and Seafood 2.61 0.92 2.16

- Milk, Cheese and Eggs 1.81 1.76 1.61

- Oils and Fats 3.19 1.41 4.07

- Fruit -3.55 2.39 3.23

- Vegetables and Starchy Foods 0.46 -0.01 1.39

- Sugar, Jam, Honey, Chocolate and Confectionery 2.87 3.48 0.75

- Food Products n.e.c. 5.17 1.24 1.25

Non-Alcoholic Beverages 3.25 1.61 2.01

- Coffee, Tea and Cocoa 5.77 2.32 3.23

- Mineral Waters, Soft Drinks, Fruit and Vegetable Juices 2.38 1.39 1.41

ALCOHOLIC BEVERAGES AND TOBACCO 1.65 0.69 0.91

CLOTHING AND FOOTWEAR 2.17 1.33 2.56

Clothing 2.86 1.65 2.02

Footwear 1.37 0.70 3.41

HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS 2.26 2.42 2.54

Rentals for Housing 1.56 0.12 0.22

Maintenance and Repair of Dwelling 3.61 3.42 4.09

Water Supply and Miscellaneous Services Related to the Dwelling 1.71 1.71 1.71

Electricity, Gas and Other Fuels 3.01 3.72 2.96

FURNISHINGS, HOUSEHOLD EQUIPMENT AND ROUTINE HOUSEHOLD MAINTENANCE

1.64 0.81 0.95

Furniture and Furnishings 1.59 1.87 1.83

Household Textiles 2.01 1.30 0.97

Household Appliances 3.11 1.62 1.66

Glassware, Tableware and Household Utensils 2.90 2.45 1.37

Tools and Equipment for House and Garden 1.15 0.47 0.71

Goods and Services for Routine Household Maintenance 1.34 0.34 0.63

HEALTH 0.23 0.49 0.37

Medical Products, Appliances and Equipment 0.53 0.60 0.31

Health Services 0.12 0.36 0.34

TRANSPORT 1.98 1.69 1.21

COMMUNICATION 0.01 0.00 0.00

RECREATION AND CULTURE 0.77 0.84 1.07

EDUCATION 0.00 0.00 0.00

RESTAURANTS & ACCOMMODATION SERVICES 1.10 1.76 0.10

MISCELLANEOUS GOODS AND SERVICES 3.75 1.54 1.72

ALL DIVISIONS 2.09 1.39 1.49



3

4

BANK OF JAMAICA OPERATING TARGETS

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Net International Reserves (US$MN) 1 973.7 2 171.41 2 553.2 2 267.1 2 087.6 1 966.1 1,777.1

Net International Reserves ($JMN) 176 347.4 194 015.5 228 124.8 202 567.5 185 898.9 175 671.9 158 786.6

- Assets 249 257.0 266 188.8 306 888.7 282 055.4 263 507.4 252 004.5 235 788.4

- Liabilities -72 909.6 -72 173.4 -78 763.8 -79 487.9 -77 608.5 -76 332.6 -77 001.8 Net Domestic Assets -102 116.5 -108 922.5 -149 205.7 - 122 007.0 - 105 419.5 -83 961.8 -75 089.9

-Net Claims on the Public Sector 115 712.7 101 374.0 75 721.2 94 900.4 97 214.7 96 540.4 118 844.8 - Net Credit to Banks -14 289.5 -13 844.2 -13 934.0 -14 053..5 -13 886.9 -14 167.6 -15 188.5 - Open Market Operations -136 206.2 -129 180.1 -143 694.0 -135 415.3 -121 500.5 -98 899.8 -111 572.0

- Other -67 333.5 -67 272.2 -67 298.9 -67 438.6 -67 246.9 -67 434.9 -67 174.2 Monetary Base 74 230.9 85 093.0 78 919.2 80 560.5 80 479.4 91 710.1 83 696.7

- Currency Issue * 47 295.8 56 710.7 50 310.4 50 886.8 50 892.7 62 646.7 53 778.1 - Cash Reserve 26 660.0 27 713.5 27 494.5 28 913.6 29 374.5 28 822.7 29 847.4 - Current Account 275.1 668.8 1 114.3 760.1 212.2 240.7 194.2 % Change Monetary Base (F-Y-T-D) -4.0 10.0 2.1 2.1 2.0 16.2 6.1

* Excludes BOJ’s teller cash; p: preliminary

MONETARY AGGREGATES (End-of-Period)

(J$MN)

M1J M1* M2J M2* M3J M3*

2008/2009 June 82 507.0 89 946.4 197 782.9 291 010.2 265 442.6 358 669.8 September 83 536.5 90 900.7 199 542.5 292 918.6 268 505.6 361 867.2 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 103 826.7 112 954.1 236 177.3 349 882.9 348 302.0 462 007.6



5

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

Jun-10r Sep-10

r Dec-10

r

Mar-11

r Jun-11

p Sep-11

p Dec-11

p Mar-12

p

M2J 8 368.3

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

17 458.1 -8 842.7

Currency -38.7 -81.9 8 079.8 -5 065.5 945.4 364.4 8 132.9 -5 415.1

Demand Deposits 3 262.0 2 452.7 -272.7 -737.9 3 825.8 -4 617.3 6 657.3 3 515.4 Savings Deposits 2 509.0 716.0 887.2 314.7 2 117.4 -728.2 2 806.8 349.8 Time Deposits 2 636.1 -402.0 151.0 938.6 340.2 -367.7 -138.9 -262.0

OTHER DEPOSITS 3 167.0 1 864.9 1 592.6 2 658.4 2 843.7

452.6 12 896.5 1 776.9

TOTAL (M3J) 11 535.4 4 549.7 10 437.9 - 1 891.7 10 072.4

-4 896.2 30 354.6 7 065.9

SOURCES OF CHANGE IN LOCAL CURRENCY MONEY SUPPLY

N.I.R. of B.O.J. 3 920.6 15 896.3 17 668.0 34 109.5 -25 557.4

-16 668.6

-13 031.2 -14 081.1

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 837.3 17 500.3 -14 742.2 -35 616.4 14 581.3

-8 204.6

19 753.8 18 890.4

Public Sector -8 389.1 12 951.6 -14 711.4 -37 780.1 13 842.0

-15 023.7

12 355.9 12 377.7

Private Sector 9 226.4 4 548.7 -30.8 2 163.7 739.3

6 819.1

7 397.9 6 512.7

Open Market Operations 10 638.4 -25 495.4 7 026.2 -14 513.9 8 278.6

13 914.9

22 600.7 -12 672.2

Other -3 860.9 -3 351.5 485.9 14 129.1 12 769.9

6 062.1

1 031.3 797.0

TOTAL 11 535.4 4 549.7 10 437.9 - 1 891.7 10 072.4

-4 896.2

30 354.6 -7 065.9

Memo:

Foreign Currency Deposits (Private Sector) - 3 145.8 -5 635.8

220.8 -286.1 1 595.2 -3 973.2 1 630.3 7 307.1

Foreign Currency Loans (Private Sector) -8 454.7 -2 389.7

-126.8 -2 100.8 1 573.4 -2 411.1 6 546.7 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 2010/2011

June 2.25 – 6.00 2.25 – 6.50 2.24 17.98 4.20 20.10 3.43 September December March

2.25 – 5.72 2.25 – 5.72 2.25 – 6.40

2.25 – 6.25 2.25 – 6.00 2.00 – 6.75

2.27 2.13 2.10

18.54 18.30 18.12

4.12 4.16 5.86

18.34 18.03 17.70

3.29 3.34 3.73

*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 June 13.81 14.77 September 16.69 16.98 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

6.47 6.45 6.24

6.37 6.21 6.27

6.56 6.46 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

6.25 6.25 6.25



8A

JAMAICA: GOVERNMENT BOND MARKET GOJ Maturities


Applicable Interest Rate

b/

Maturity Date

Amount J$M

24 February FR BMI Note 2012 32 987.97 12.00

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



8B

JAMAICA: GOVERNMENT BOND MARKET

GOJ Domestic Market Issues


Amount raised

J$M Issue Date Stock Name Features

18 January VR BMI Note 2013A(re-opened) First issued 03 August 2011. Tenor of one year and seven 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 February 2012.

2 357.98

18 January VR BMI Note 2020 (re-opened) First issued 24 February 2010. Tenor of seven years and eleven months. Fixed at 7.72% for the first three months, thereafter interest will be paid quarterly at a variable rate of 1.50 percentage point above the “Benchmark Rate”. First interest payment will become due and payable on 24 February 2012.

2 854.95

18 January FR 12.0% BMI Note 2014 (re-opened) First issued 14 May 2010. Tenor of two years and four months. First interest payment will become due and payable on 14 May 2012. Thereafter, interest will become due and payable semi-annually, until maturity. .

54.21

8 February VR BMI Note 2017 (re-opened) First issued 24 February 2010. Tenor of five years. Fixed at 7.595% 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 24 February 2012.

4 101.26

23 February VR BMI Note 2020A Tenor of eight years and six months. Fixed at 6.57% for the first six months, thereafter interest will be paid semi-annually at a variable rate of 1.375 percentage points above the “Benchmark Rate”. First interest payment will become due and payable on 24 August 2012.

11 186.77

24 February FR 7.2% 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 semi-annually, until maturity.

4 000.00

27 March FR 13.25% BMI Note 2040 (re-opened) First issued 24 February 2010. Tenor of twenty-seven years and eleven months. First interest payment will become due and payable on 24 August 2012. Thereafter, interest will become due and payable semi-annually, until maturity.

739.78

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 Traditional Goods

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

2008/2009

r 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 December

r 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 133.1 441.7 47.9 0.0 76.6 442.2 267.5 1 409.0

June 31.6 83.6 13.3 0.0 22.4 109.5 59.4 319.8

September r 37.0 87.1 7.7 0.0 22.4 110.7 64.6 329.5

Decemberr 29.6 146.0 0.0 0.0 13.5 101.0 63.7 353.8

March r 34.9 130.0 26.9 0.0 18.3 127.0 81.5 418.6

2010/2011 June September December

1112J

33.5 38.7 34.8

163.2 141.8 145.8

28.9 28.9

6.4

0.0 0.0 0.0

22.7 19.9 14.6

137.3 117.2 110.8

76.3 60.9 62.3

461.9 407.4 374.7

r-revised; p-preliminary



10

r: revised

p: provisional

BALANCE OF PAYMENTS QUARTERLY SUMMARY (US$MN)

Jun-10r Sep-10r Dec-10r Mar-11r Jun-11r Sep-11r Dec-11r 1. Current Account -229.2 -254.2 -418.3 -330.5 -483.9 -540.0 -714.5 A. Goods Balance -804.6 -798.2 -963.0 -971.5 -980.4 -1 115.6 -1 193.4 Exports (f.o.b.) 319.8 329.5 350.6 418.6 461.9 407.4 374.7 Imports (f.o.b.) 1 124.4 1 127.7 1 313.6 1 390.1 1 442.4 1 523.0 1 568.0 B. Services Balance 194.7 163.5 141.4 291.9 187.0 120.1 98.7

Transportation -105.9 -111.1 -131.3 -108.7 -126.4 -156.6 -162.2 Travel 436.7 410.1 410.6 561.7 455.1 415.1 401.4 Other Services -136.1 -135.5 -138.0 -161.1 -141.7 -138.4 -140.4 Goods & Services Balance -609.9 -634.6 -821.6 -679.7 -793.4 -64.0 -1 095.6

C. Income -129.2 -109.6 -137.7 -146.8 -197.6 -64.0 -139.9 Compensation of Employees 9.0 30.2 46.3 3.0 4.8 14.8 26.1 Investment Income -138.2 -139.8 -184.0 -149.7 -202.4 -78.9 -165.9 D. Current Transfers 510.0 490.0 541.0 496.0 507.1 519.5 520.0 General Government 59.4 44.2 62.3 35.3 28.0 32.6 25.4 Other Sectors 450.6 445.8 478.7 460.7 479.1 486.9 494.6 2. Capital & Financial Account 229.2 254.2 418.3 330.5 483.9 540.0 714.5

A. Capital Account -7.0 -6.1 -5.9 -2.6 -1.6 4.4 2.4

Capital Transfers -7.0 -6.1 -5.9 -2.6 -1.6 4.4 2.4 General Government 0.0 0.2 0.0 4.6 5.4 10.7 8.3 Other Sectors -7.0 -6.3 -5.9 -7.2 -7.0 -6.3 -5.9 Acq./disp. Of non-produced non-fin. Assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0

B. Financial Account 236.2 260.3 424.1 714.8 485.5 535.6 712.1

Official Investment 60.1 199.4 237.5 474.8 -346.5 177.8 146.6 Private Investment (including net errors & omissions)

219.9 238.8 384.4 240.0 545.9 171.2 451.1

Reserves -43.8 -177.9 -197.7 -381.8 286.1 186.5 114.5



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

86.30 86.60

87.30

83.31 84.20 87.65

134.69 134.44 139.28



12

BANK OF JAMAICA: NET INTERNATIONAL RESERVES

(End-of-Period)

Gross Foreign

Assets (US$MN)

Gross

Foreign Liabilities (US$MN)

International Reserves

(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

3 434.7

3 156.7

2 949.2

2 820.4

2 638.9

881.5

889.6

868.6

854.3

861.8

2 553.2

2 267.1

2 080.6

1 966.1

1 777.1

37.2

28.5

27.8

25.5

23.5

26.7

21.4

20.7

19.2

17.8



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.)

2006/2007

June 85 108.2

1 882.6

10 627.1

September 86 196.0

610.4

3 441.1

December 100 678.0

2 823.9

18 459.0

March 90 595.1

556.1

7 662.6

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 2 248.7

2009/2010

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 23.8

2010/2011

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 22.8 107.0

2011/2012 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

Note: Both volume and value reflect ordinary and block quarterly transactions;

Trading on the Junior Market commenced in October 2009.



14

PUBLIC SECTOR DOMESTIC SECURITIES Outstanding Stocks

(J$MN)

End Period

Local Registered Stocks Treasury Bills

Bonds

GOJ Benchmark

Notes

BOJ Open Market Operations

Securities

2003/2004

September 232 914.5 2 400.0

160 594.3

83 700.3 December 228 509.3 4 400.0 178 308.3 81 969.4 March 220 819.2 3 750.0 184 219.0 108 281.7 March 240 923.0 2 950.0 114 524.1 86 203.8 2004/2005

June 222 372.2 3 950.0

187 932.0

123 222.1 September 222 522.4 3 750.0 197 847.6. 127 629.3 December 220 290.5 3 750.0 210 300.0. 130 692.1 March 218 412.6 4 050.0 214 565.6 143 854.8 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 0.0 4 400.0 33 068.2 731 602.4 110 710.8 September 0.0 4 400.0 31 547.2 750 423.9 136 206.2 December 0.0 4 000.0 31 116.4 760 285.9 129 180.1 March 0.0 4 000.0 29 981.8 769 759.3 143 694.0 2011/2012 June September December March

0.0 0.0 0.0 0.0

4 000.0 4 000.0 4 000.0 4 000.0

29 645.0 28 497.1 28 182.5 64 400.3

792 017.9 831 394.5 846 266.4 839 483.3

135 415.3 121 500.5 98 899.8 111 572.0



15

PRODUCTION OF SELECTED COMMODITIES

( Quarterly Flows- ‘000 tonnes)

Crude Bauxite* Alumina Total Bauxite** Sugar

Bananas***

2004/2005 3 451.4 4 028.5 13 411.9 142.0 18.1

December 398.5 1 062.6 3 030.0 3.6 0.0

March 1 074.6 1 052.8 3 620.1 74.7 0.0

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 7.2

2006/2007 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 5.8

2007/2008 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 0.0

2008/2009 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 0.0

2010/2011 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 1 240.5

476.5 2 438.5 47.9 0.0

September

December

March

1 346.8 1 228.5 1 154.7

482.9 490.4 476.5

2 580.4 2 549.4 2 392.2

2.0 7.7

92.0

0.0 0.0 0.0

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



16A

Source: Statistical Institute of Jamaica 16B

Source: Statistical Institute of Jamaica

Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11

Total Value Added at Basic Prices -2.4 -1.6 -2.5 -1.1 -0.6 1.6 2.2 0.7 1.6

Agriculture, Forestry & Fishing 19.4 5.6 -6.0 3.7 -4.7 13.7 10.7 2.9 15.0

Mining & Quarrying -57.5 -42.1 1.4 30.3 22.4 37.5 33.3 7.7 8.0

Manufacturing -1.0 -0.4 -2.4 -5.3 -3.5 -0.5 -0.4 2.1 4.7

Food, Beverages & Tobacco -2.6 -2.5 -0.9 1.4 0.6 1.6 5.7 2.4 0.5

Other Manufacturing 0.6 2.2 -4.2 -12.2 -7.4 -2.9 -8.1 1.6 9.0

Construction & Installation -4.1 -1.0 -2.2 -1.3 0.3 -0.2 1.4 1.4 0.1

Electricity & Water 2.5 -1.2 -2.5 -5.8 -7.6 1.6 0.3 1.1 3.5

Wholesale & Retail Trade; Repairs; Installation Of Machinery -2.3 -3.6 -4.1 -3.7 -2.2 0.0 0.0 0.1 0.7

Hotels and Restaurants 2.3 6.7 -1.0 2.4 5.5 4.3 2.4 0.0 0.8

Transport, Storage & Communication 1.9 2.2 -3.2 -3.9 -2.9 -1.1 3.3 -2.0 -1.6

Finance & Insurance Services 0.3 -5.9 -6.0 -5.1 -2.5 -3.0 -0.1 -1.1 -0.7

Real Estate & Business Services -1.3 -1.1 -0.9 -1.2 -1.6 0.0 0.7 0.8 0.5

Government Services -2.0 0.4 -0.9 -0.4 1.5 -0.4 0.3 0.5 -0.5

Other Services -1.1 -1.7 -2.6 -1.1 -0.7 0.6 0.7 -0.8 -0.3

Less Financial Intermediation Services Indirectly Measured (FISIM) 1.1 -9.0 -11.3 -15.1 -14.2 -5.2 -4.1 -5.4 -3.6

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

VALUE ADDED BY INDUSTRY AT CONSTANT (2007) PRICES (% CHANGE)

December 2009 - December 2011 (Seasonally Unadjusted)

Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11

Total Value Added at Basic Prices -1.6 -1.1 -0.4 2.0 -1.1 1.0 0.2 0.5 0.0

Agriculture, Forestry & Fishing 1.4 -5.8 -4.9 13.3 -5.6 12.3 -7.4 4.4 6.0

Mining & Quarrying 6.5 -1.0 -1.4 25.3 0.0 11.2 -4.4 1.3 0.4

Manufacturing -1.4 -3.3 -1.7 1.2 -0.1 -0.1 -1.6 3.9 2.9

Food, Beverages & Tobacco -1.7 -2.5 -0.8 6.2 -2.3 -1.0 3.3 2.3 -4.2

Other Manufacturing -1.1 -4.2 -2.6 -4.4 2.6 1.0 -7.2 6.0 11.6

Construction & Installation -2.1 -4.0 0.2 -0.3 -3.7 5.5 -1.1 0.5 -1.2

Electricity & Water -1.8 1.6 -1.2 0.3 0.1 0.3 0.7 0.2 -0.9

Wholesale & Retail Trade; Repairs; Installation Of Machinery -0.4 -2.2 -0.8 -0.2 1.1 -0.1 -0.7 -0.2 1.8

Hotels and Restaurants 2.6 8.3 -3.8 -3.8 5.6 6.2 -4.7 -6.2 6.3

Transport, Storage & Communication -1.1 0.7 -2.5 -1.2 -0.1 3.1 1.6 -6.4 0.3

Finance & Insurance Services -1.4 -3.0 -0.5 -0.1 0.3 -2.2 1.7 -1.1 0.6

Real Estate & Business Services -1.4 -0.5 0.0 0.6 -1.7 1.2 0.7 0.7 -2.0

Government Services -9.1 -2.6 6.3 5.9 -7.4 -4.4 7.1 6.1 -8.3

Other Services -0.8 -0.5 -0.4 0.6 -0.4 0.7 -0.2 -1.0 0.3

Less Financial Intermediation Services Indirectly Measured (FISIM) -4.5 -5.3 -2.2 -4.1 -3.4 4.6 -1.0 -5.3 -1.6

December 2009 - December 2011 (Seasonally Adjusted)(Percentage Change (% ) Over the Preceding Quarter)

VALUE ADDED BY INDUSTRY AT CONSTANT (2007) PRICES (% CHANGE)



D. BANK OF JAMAICA BALANCE SHEET

ASSETS AND LIABILITIES (End of Period)

J$MN


1. Assets 355 729.1 342 264.3 359 058.1 371 277.9 418 625.2 397 050.5 381 068.9 370 971.4 358 589.7

Foreign 215 986.1 216 097.1 239 430.3 255 506.6 294 268.0 270 373.4 254 162.9 243 924.7 230 191.6

Current Account & Foreign 25 615.4 31 550.9 50 097.4 19 357.2 16 675.5 17 852.7 15 971.4 36 168.5 35 430.2 Currency Balances

Time Deposits & Securities 144 661.9 142 367.6 147 199.3 194 189.1 235 874.2 210 100.8 195 984.4 165 795.2 152 873.7 Holdings of Special Drawing

Rights 29 079.4 29 198.1 13 143.7 28 763.0 28 460.0 29 096.0 28 790.7 28 527.5 28 291.2

Other 16 629.4 12 980.5 28 989.9 13 197.3 13 258.3 13 323.9 13 416.4 13 433.5 13 596.5

Local 139 743.0 126 167.2 119 627.8 115 771.3 124 357.2 126 677.2 126 906.0 127 046.7 128 398.1

Public Sector Securities 101 537.2 94 033.3 92 785.2 89 632.0 89 598.5 92 881.2 93 239.5 92 988.0 92 690.5

Discounts & Advances 14 520.1 9 446.9 3 578.6 2 294.7 0.0 0.0 0.0 0.0 0.0

Other Assets 23 685.7 22 687.0 23 264.0 23 844.6 34 758.7 33 796.0 33 666.5 34 058.6 35 707.6

Liabilities

355 729.1

342 264.3

359 058.1

371 277.9

418 625.2

397 050.5

381 068.9

370 971.4

358 589.7

Foreign

55 353.3

8 828.2

13 133.6

68 751.3

72 472.8

72 494.7

75 341.1

75 373.8

75 666.2

Local

300 375.7

339 067.2

345 924.5

302 526.8

346 152.4

324 555.8

305 727.9

295 597.6

282 923.5

Currency in Circulation

47,058.7

46 603.2

47 401.6

56 813.5

50 401.9

50 983.3

51 003.1

62 743.0

53 778.1

Deposits

199 649.0

248 953.6

260 295.8

207 032.0

245 113.5

221 698.6

206 283.2

185 545.3

179 503.9

Bankers

61 722.6

58 103.3

51 922.4

47 522.4

44 372.8

45 581.2

45 310.4

44 996.4

46 984.2

Government

11 728.1

21 185.7

6 136.8

6 059.8

13 683.1

24 532.1

20 189.8

8 774.2

10 117.1

Open Market Operations

121 349.2

110 710.8

136 206.2

129 180.1

143 694.0

135 415.3

121 500.5

98 899.7

111 572.0

Other

4 849.1

58 953.8

66 030.4

24 269.7

43 363.6

16 170.0

19 282.5

32 874.8

10 830.6

Allocation of Special Drawing Rights

34 786.0

35 155.3

35 155.3

35 155.3

35 155.3

36 280.4

36 280.4

36 280.4

36 280.4

Capital & Reserves

24.0

24.0

24.0

24.0

24.0

24.0

24.0

24.0

24.0

Other Reserves

7 759.5

8 331.1

9 073.2

9 990.6

11 370.5

12 945.7

13 333.6

12 844.9

12 970.5

Other Liabilities (Net)

11 098.6

-5 631.1

-6 025.4

-6 488.8

4 087.2

2 623.8

-1 196.5

-1 840.0

3 366.6



E. COMMERCIAL BANKS’ BALANCE SHEET

ASSETS AND LIABILITIES (End-of -period)

J$MN

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

p

Assets

591 766.5

575 364.0

579 474.8

585 820.2

587 133.9

581 913.6

581 727.8

608 392.2

624 244.5 Cash 6 447.5 6 044.8 6 898.9 8 234.0 6 899.2 6 530.2 6 171.7 9 792.9 6 216.4 Balances with BOJ 90 568.3 88 926.4 92 596.2 97 328.7 107 811.5 99 324.4 93 457.6 81 915.2 94 140.1 Foreign Assets 129 647.7 121 103.3 116 867.6 115 612.9 114 393.2 105 771.3 111 954.7 115 335.1 113 782.9 Loans & Advances 256 993.7 249 855.6 252 195.0 251 361.0 248 924.3 253 372.9 253 683.1 266 044.2 277 204.9 Private Sector 219 459.4 218 683.5 220 947.9 221 222.3 221 238.4 223 545.6 228 897.2 243 206.9 251 915.9 Public Sector 37 534.3 31 172.1 31 247.1 30 138.7 27 685.9 29 827.3 24 785.9 22 837.3 25 289.0 Public Sector Securities 62 028.3 65 798.5 67 581.2 69 400.0 64 174.9 69 850.0 69 667.4 82 529.7 79 374.5

Cheques in the Process of Collection

4 671.2

4 836.3

3 123.9

3 340.6

2 015.1

3 244.1

2 887.6

2 476.1

2 779.5 Other Assets 41 409.8 38 799.1 40 212.0 40 543.0 42 915.7 43 820.7 43 905.7 50 298.9 50 746.2 Liabilities 591 766.5 575364.0 579 474.8 585 820.2 587 133.9 581 913.5 581 727.8 608 392.2 624 244.5 Deposits

Local Currency Foreign Currency

378 413.5 219 801.2 158 612.3

373 667.1 224 310.8 149 356.3

372 891.6 226 608.6 146 283.0

379 094.1 237 205.0 141 889.1

382 636.7 237 956.0 144 680.7

383 679.1 238 574.4 145 104.7

387 584.8 239 026.6 148 558.2

400 120.1 237 205.0 141 889.1

409 844.6 251 981.8 157 862.8

Foreign Liabilities

77 845.8

65 985.8

64 469.3

62 870.4

56 148.3

56 464.8

53 882.0

54 771.1 54 016.4

Discounts & Advances from BOJ 506.6 494.9 327.5 457.4 518.8 479.1 618.7 603.5 778 .7

Loans/Advances from Other Institutions

11 425.0

11 250.1

10 724.5

10 727.2

10 556.8

8 726.8

7 230.4

6 244.2

5 826.3

Cheques in the Process of Payment

5 292.7

4 198.5

3 441.6

3 082.5

4 995.5

3 546.5

3 583.9

3 044.8

3 065.3 Other Liabilities 118 282.9 119 767.6 127 620.3 129 588.6 132 277.8 129 017.5 128 828.0 143 608.5 150 713.2 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



2 LONDON MONEY RATES – INTERBANK STERLING

(End- of-Period)

1 MONTH 3 MONTHS 6 MONTHS 12 MONTHS 2007/2008

June 5 92/100- 5 95/100 6 1/100 - 5 93/100 6 14/100 – 6 6/100 6 33/100 – 6 23/100 September 6 8/100 – 6 18/100 6 25/100 – 6 8/100 6 25/100 – 6 15/100 6 18/100 – 6 8/100

December 6 4/100 – 5 24/25 6 2/100 – 5 47/50 5 97/100 – 5 91/100 5 ¾ – 5 67/100 March 5 70/100- 5 79/100 5 94/100 - 6 5 90/100 – 5 98/100 5 74/100 – 5 84/100

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



3 PRIME LENDING RATES

(End- of-Period)

EURO-ZONE UNITED STATES UNITED

KINGDOM

Repo rate Fed Funds Rate Discount Rate Prime Rate Repo rate

2007/2008

June 4.00 5.25 6.25 8.25 5.50

September 4.00 4.75 5.25 8.25 5.75 December 4.00 4.25 4.75 7.25 5.50

March 4.00 2.25 2.50 5.25 5.25

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

June 1.25 0 – 0.25 0.75 3.25 0.50

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



4A

4B INTERNATIONAL EXCHANGE RATES

EXCHANGE CROSS RATES

(Mar. 2012)

GBP CAN$ US$ Yen Euro

GBP 1.0000 1.5799 1.5535 119.60 1.1975

CAN$ 0.6330 1.0000 0.9833 75.7000 0.7580

US$ 0.6437 1.0170 1.0000 76.9870 0.7709

Yen 0.0084 0.0132 0.0130 1.0000 0.0100

Euro 0.8351 1.3193 1.2972 99.871 1.0000

4C

INTERNATIONAL EXCHANGE RATES

STERLING vs. OTHER MAJOR CURRENCIES

(Currency/pound)

(End- of-Period)

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

Sterling vs. US$ 1.6048 1.6067 1.5623 1.5535 1.5984

Sterling vs. Canadian $ 1.5595 1.5493 1.6231 1.5799 1.597

Sterling vs. Yen

132.84 129.54 120.32 119.6 131.77

Sterling vs. Euro

1.1315 1.1062 1.1618 1.1975 1.1988

INTERNATIONAL EXCHANGE RATES

US$ vs. OTHER MAJOR CURRENCIES

(Currency/US$)

(End- of-Period)

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

US$ vs. Sterling 0.6691 0.6358 0.6411 0.6232 0.6224 0.6401 0.6437 0.6256

US$ vs. Canadian $ 1.0606 1.0298 0.9946 0.9718 0.9643 1.0389 1.0170 0.9991

US$ vs. Yen 88.531 83.520 81.126 82.777 80.627 77.013 76.987 82.434

US$ vs. Euro 0.8137 0.7353 0.7468 0.7051 0.6885 0.7436 0.7709 0.7500



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

North Sea Brent 77.79 91.80 114.44 113.76 113.76 107.91 124.93

West Texas Intermediate 75.55 89.23 102.98 96.29 85.61 98.83 103.02

5B

WORLD COMMODITY PRICES FOOD

(Period Averages)

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

Winter)

271.67 306.52 316.75 326.43 315.92 279.68 278.85

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

6

MAJOR STOCK MARKET INDICES (End- of-Period)


TOKYO Nikkei Index 11089.94 9382.64 9369.35 10228.92 9755.1 9816.09 8700.29 8455.35 10083.56

NEW YORK

Dow Jones Industrials 10856.63 9774.02 10788.05 11577.51 12319.73 12414.34 10913.38 12217.56 13212.04

S & P Composite 1169.43 1030.71 1141.20 1257.64 1325.83 1320.64 1131.42 1257.60 1408.47

LONDON

Financial Times SE 100 5679.64 4916.87 5548.62 5899.94 5908.76 5945.71 5128.48 5572.28 5768.45

FRANKFURT

Dax Index 6153.55 5965.52 6229.02 6914.19 7041.31 7376.24 5502.02 5898.35 6946.83


Glossary 97

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 98

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 99

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.

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.


Glossary 100

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.

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.


Glossary 101

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 102

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 103

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 104

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 105

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 106

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 107

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 108

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 109

Jan – Mar 2012 90 External Competitiveness in Jamaica

Volume 12 No. 4

Documents

January March 2012 Volume 12 No. 4