On the occasion of its meeting on 02 November 2022 and on its review of the financial system’s performance and risks up to end-August 2022, the Financial Policy Committee issues the following statement:
While the Jamaican economy continued to record strong growth for the calendar year to the September 2022 quarter, inflation accelerated. Growth of 2.5 – 3.5 per cent is anticipated for the September 2022 quarter, following expansions of 6.5 per cent and 4.8 per cent recorded in the March and June 2022 quarters, respectively. The expansion in the economy has been principally driven by the performance of the tourism sector, supported by strong remittance inflows. Inflation on the other hand rose from an annual average of 7.4 per cent at March 2022 to 9.9 per cent at September 2022, above the central bank’s target range of 4 – 6 per cent.
In the context of the performance of the economy, the financial system up to end-August 2022 remained generally stable. Financial institutions continued to be adequately capitalized, liquid and profitable. In addition, asset quality for the banking sector remained stable and well below the prudential benchmark. Systemic risks associated with financial cycles and the systems exposure to selected sectors continued to moderate.
Macro-financial risk emanating from continued monetary tightening and fears of a global recession have, however risen. Driven by a surge in – and the uncertain outlook for – inflation, the pace of monetary tightening among Jamaica’s main trading partners accelerated during the September 2022 quarter. Domestic financial institutions were, however, adequately capitalised to withstand these shocks.
Stress testing exercises on the impact of rising interest rates (or falling bond prices) and on a potential synchronised downturn in the global economy (including Jamaica) indicate that the financial sector remains broadly resilient to the contemplated shocks.
However, in the context of elevated risks, the supervisors of the financial system have continued their heightened surveillance of the financial system and are working to ensure that the residual risks to the system from these potential shocks are mitigated.
Financial Policy Committee
02 November 2022
