As firms’ expectations for economic growth waned and their willingness to invest in new plant and equipment dipped — primarily because of the depreciation of the Jamaican dollar against the United States currency — co-chair of the Economic Programme Oversight Committee Keith Duncan, is adamant that Jamaica must get comfortable with the floating exchange rate.

He believes that Jamaica should be focused on remaining within the inflation target range of 3.5 per cent to 6.5 per cent as set by the International Monetary Fund (IMF).

His remark comes against the backdrop of the latest available results for the period ending August 2018, which note that the Government of Jamaica (GOJ) has met the targets for the quantitative performance criteria, and indicative targets for the IMF stand-by agreement as at end-June 2018, with the exception of the inflation target.

Bank of Jamaica continues to pursue the Government’s policy of a flexible exchange rate which reflects changes in market fundamentals. The exchange rate since October 2017 has reflected more normal two-way movements, relative to the historical trend where the movement has been in mainly one direction.

At 16 October 2018, the exchange rate (at J$132.17 to US$1) reflected an annual point-to-point depreciation of 3.1 per cent, compared with an annual appreciation of 0.5 per cent a year earlier, but lower than the average annual depreciation of 4.5 per cent over the previous three years.

“Historically, Jamaica has really had a fixation on the dollar and exactly where it is. Right now we are seeing the dollar move in several cycles over the last year. This is consistent with how most modern economies operate and it is something that, as a country, we will have to get comfortable with,” he told journalists during the EPOC quarterly press briefing at the JMMB Haughton Avenue headquarters on Wednesday.

He noted that as the country gets accustomed to a flexible exchange rate, there will be no reason for Jamaicans to be perturbed when the dollar moves in one direction or the other.

http://www.jamaicaobserver.com/business-report/get-comfortable-with-the-floating-exchange-rate-duncan_147340