Bank of Jamaica (BOJ) Governor Richard Byles is scheduled to appear before the Standing Finance Committee of parliament for the first time under new provisions in the BOJ (Amendment) Act that gave the BOJ its independence. Under section 34FG subsection 3 of the Bank of Jamaica (Amendement) Act 2020, the central bank is required to face the committee to answer questions relating to statements from the Monetary Policy Committe (MPC).

What statement?: The MPC by law is required to publish statements on the performance of the central bank with respect to its monetary policy and achievements in relation to the inflation target. These statements must be prepared at the end of every six months or sooner on the direction of the committee or the House of Representatives.

The statements relate to those release by the central bank in the aftermath of its rate hike decision, the second of which took place on November 16. Then, the Bank of Jamaica pushed interest rates up by 100 basis points after seeing inflation rise to 8.2 per cent in September. Recall, that was well above the upper limit of the four to six per cent inflation range that was set by the minister in writing to the Bank of Jamaica. Based on the BOJ (Amendment) Act 2020, the target inflation range is set by the finance minister after consulting with the central bank.

Stoking inflation in September were increases in international commodity and shipping prices, a shock to agricultural prices and one-off increases in regulated transportation and energy prices.

A few days after the decision was made by the MPC (the committee met on November 11 and 12), the Statistical Institute of Jamaica (Statin) on November 15 released new information showing inflation in October reached 8.5 per cent – the highest it has been in 13 years. Come tomorrow, Statin is scheduled to release new data on inflation and that will certainly impact any new decision made by the central bank.

In November, the MPC wrote the minister of finance & the public service to explain the causes of the breach, the measures that have been taken by the bank to restore inflation to the target range and the short-term outlook for inflation. Several measures have been taken, chiefly a hike in policy interest rates, which at the moment stands at two per cent. So there are several questions to be answered and those will be provided to Parliament today.

Preparation: Wayne Robinson, senior deputy governor of the Bank of Jamaica said the bank will be answering questions relating to its management of the economy in the first half of the calendar year which was tabled in September. The Governor, who is the chairman of the MPC, and team will appear before the Standing Finance Committee of parliament to answer questions in relation to this report and in general our stewardship of monetary policy and performance in relation to the inflation target set by the Government. The bank in preparation for this occasion provided a briefing to members of parliament and the senate on monetary policy formulation and implementation and how monetary policy impacts the economy. We look forward to appearing before the Standing Finance Committee as this is a key element of the accountability framework underpinning the inflation targeting strategy.

Expectation: Julian Robinson, Opposition spokesman on finance, said he’s expecting the governor to explain the full reasoning behind the interest rate hike decisions taken over the last few months. He told the Jamaica Observer that he also expects to hear how interest rate hikes will help to control inflation, while expressing scepticism that it will work. Robinson added that he believes the 100 basis points increase in September was very aggressive.

The matter of how long interest rates and inflation will be heightened is also another matter of concern, especially as it relates to how external inflationary pressures are causing increases in the price of things like rental costs, for example.

He also says he will seek answers on other issues relating to volatility in the foreign exchange market and the interventions.

The BOJ can also expect questions on its structure and the operation of the monetary policy committee.

What next?: The BOJ appearance in Parliament today comes a day before Statin is scheduled to release inflation data for the month of November. The MPC is also scheduled to meet later this week ahead of a rate decision set for Monday, December 20. That will be the last decision for the year, but international events are expected to influence the BOJ’s decision, not just what’s happening locally.