Sunday 18 August, 2019

Golding wants answers from BOJ as dollar reaches record high

Opposition spokesman on finance, Mark Golding, challenged the management of the BOJ to give reasons for its actions in the foreign exchange market since April.

Opposition spokesman on finance, Mark Golding, challenged the management of the BOJ to give reasons for its actions in the foreign exchange market since April.

With the Jamaican dollar trading at a new record high of $135.44 to US$1 on July 31, the Opposition People's National Party (PNP), has repeated its call for the Bank of Jamaica (BOJ) to explain its interventions in the foreign exchange market.

And, like it did last week, the PNP is again questioning whether the central bank is deliberately weakening the Jamaican dollar.

On Wednesday, Opposition spokesman on finance, Mark Golding, challenged the management of the BOJ to give reasons for its actions in the foreign exchange market since April. Since those interventions, the dollar has depreciated in value by more than six per cent against its US counterpart.

Golding said the opposition also wants to know why the inflation target was set at four to six per cent for this financial year, and whether the local currency was “deliberately depreciated” by the market actions of the BOJ because of failure to meet that inflation target.

“Repeated platitudes about the normal interaction of supply and demand in setting the price of the US dollar in a free market are not helpful, and do not explain why the BOJ was buying aggressively in a tight market and depreciating the currency by over 6% in three months at a time when Jamaica is substantially ahead of its reserves target,” Golding said in a statement.

With inflation coming in at negative 0.3 per cent for the January to June period, Golding said the Opposition wants to know whether one of the main reasons behind the slide in the value of the local currency has been the bank's inflation target of four to six per cent for the 2018/19 fiscal year which is not being met.

Additionally, the opposition said it has noted reports of some discord between the central bank and technocrats of the Ministry of Finance over the level of the inflation target, and that the BOJ had “prevailed” in the disagreement.

Those allegations aside, Golding said the reasons for this inflation target have not been explained to the public. He said that in the absence of clarity from the central bank, its aggressive buying in the foreign exchange market is being explained by some as aimed at pushing up inflation. According to Golding, this may actually have the support of the International Monetary Fund (IMF).

“There are suggestions that this may have been encouraged by the IMF, as two critical measurements in the IMF programme apply to nominal Gross Domestic Product, which is improved by inflation. Such speculation should be put to rest by clear and open policy communication by the central bank,” Golding said.

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