Monetary Policy refers to the actions taken by the Central Bank to carry out its primary objective of maintaining price stability. In this regard, Bank of Jamaica’s monetary policy is geared towards achieving the medium term, continuous inflation target, set by the Minister after consultation with the Governor, of 4.0 per cent to 6.0 per cent. Inflation at this level, measured as the change in the consumer price index that is published by the Statistical Institute of Jamaica, will facilitate sustained growth and development in Jamaica. Bank of Jamaica has adopted full-fledged inflation targeting (FFIT) as its monetary policy framework to deliver low, stable and predictable inflation.
The Bank uses monetary policy instruments or tools to meet its inflation target, the main one being the interest rate that it pays financial institutions on their current account balances held at the central bank. The Bank uses its policy rate in the context of an interest rate corridor. It also conducts open market operations and makes occasional adjustments to the reserve requirements ratios, while managing the foreign exchange market in the context of the Government’s policy of operating a flexible exchange rate regime.