Nov 2016 Financial News

30-day CD not being phased out, says BOJ

Nov 02, 2016

The Bank of Jamaica (BOJ) says reports suggesting that it is in the process of phasing out its 30-day certificate of deposit (CD) and replacing it with the reintroduction of its 365-day CD are incorrect.

The 30-day CD is not being phased out; its role is merely being changed, the central bank asserts.

It said that as noted in a previous release in August, “there will be changes in the frequency of the offer of the 30-day instrument. Effective October 3, 2016, the bank will offer 30-day CDs in unlimited amounts on three days of the week – Monday, Wednesday and Friday.”

The 365-day instrument, which itself is being reintroduced, will not replace the 30-day CD.

The BOJ said that what is being phased out is the use of the rate on the 30-day instrument as the bank’s monetary policy signal rate.

“In a series of steps, the bank will vary the volume, frequency and price determination of the 30-day instrument. At the end of the process, the 30-day rate will cease being the bank’s policy rate. Changes in the stance of monetary policy will thereafter be signalled by changes in the overnight deposit rate,” it noted.

“It is important to note that these changes are intended to strengthen the relationship between the policy rate and short-term money market interest rates,” the BOJ said. “To this end, the bank is effecting these changes to the monetary policy framework, consistent with many other central banks, to use the overnight interest rate to signal its monetary policy stance.”

Source:
Jamaica Observer
Wednesday November 2, 2016    

http://www.jamaicaobserver.com/business/30-day-CD-not-being-phased-out--says-BOJ_78998