There is mischief afoot, inadvertent maybe, to foment policy discord between the Jamaican central bank and the finance ministry over which of them is in favour of, or against, high interest rates.

The matter has even elicited calls for Prime Minister Bruce Golding to get everyone onside so as to send a signal of policy within his administration and to end, or prevent, sapping enervating confusion.

Our sense, though, is that this debate over the supposed differences between Finance Minister Audley Shaw and the Bank of Jamaica Governor, Derick Latibeaudiere, is rooted largely in a misapprehension of Mr Shaw's nuanced remarks on the subject of interest rates in a recent radio interview. There is a lesson here, though, for Mr Shaw; it is the same one we offered to Karl Samuda: in speaking about matters with the potential to affect the financial markets, do so with clarity. Obfuscation can be deleterious.

Jamaican economy in decline

In recent months, as the global credit crisis deepened and the Jamaican economy went into decline, the local currency has depreciated sharply against the US dollar, slipping nearly 20 per cent this year alone.

Unlike in most of the developed world where sharp cuts in interest rates are among the measures adopted by governments in a bid to stimulate their economies, Jamaica has done the opposite. Mr Latibeaudiere has pushed rates up sharply. He defended the action as necessary, in the face of market disequilibrium, to squeeze credit and defend the Jamaican dollar so as to curb the inflationary impact of a depreciating currency in an economy that is more than 70 per cent import-dependent. Indeed, the two primary functions of the central bank are to preserve the value of the currency and control inflation.

Predictably, Mr Latibeaudiere's prescription has not found favour with many in the private sector, including the Jamaica Manufacturers' Association, who argue that the spiralling cost of capital hurt their businesses. Firms could be driven to the wall, deepening the recession.

It is understandable that Minister Shaw is empathetic to those who have to face high-financing costs; he said so in last week's radio interview. "I am a low-interest man," he said. Which, we believe, is a truism. Not even Mr Latibeaudiere, in the normal course of things, would opt for high interest as a primary policy tool. His view, though, is that a premature pullback would have "dire consequences" for the economy.

Policy review

Mr Shaw did not reject the essence of the central bank's thesis, except to suggest that things mostly were in place for a policy review. Inflation, for example, has moderated sharply in recent months and the severe tightness in the foreign-exchange markets had eased with the recent inflows from the multilateral institutions.

Mr Shaw, however, did not declare all objective conditions to have been met for a rate reduction. Rather, he suggested, analysis and review would be timely. The minister was nuanced rather than definitive. Unfortunately, he did not speak with sufficient clarity. In any event, policy tension and debate are not necessarily bad.

Mr Shaw, of course, would be well aware that among the objective conditions for a sustained lowering of interest is control of the public deficit so that the Government does not crowd the private sector out of the market. That, of course, will demand some tough decisions - including, perhaps, the loss of 20,000 public-sector jobs.

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