'Sharp jump' in inflation was not anticipated by BOJ

'Sharp jump' in inflation was not anticipated by BOJ

Sunday, January 19, 2020

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THE Bank of Jamaica says that the 6.2 per cent annual point to point inflation rate at 2019 reported by the Statistical Institute of Jamaica late last week, represents a “sharp jump” when compared with the 3.4 per cent recorded at September 2019.

“This inflation out-turn was not anticipated and was higher than Bank of Jamaica's target of 4.0 to 6.0 per cent,” the bank said in a release on Friday (January 17).

The bank noted that the higher inflation rate was primarily influenced by faster increases in food and energy-related prices in the consumer price index (CPI).

The “heavily weighted” Food & Non-Alcoholic Beverages division of the CPI increased over the year to December by 10.7 per cent, when compared with 6.7 per cent at September 2019, the bank said. This was primarily related to higher prices for vegetables and starchy foods, the consequence of adverse weather conditions (drought followed by heavy rains) that affected the island between June and October 2019, it said, while there was also news of crop-related diseases affecting some items.

Meanwhile, Housing, Water, Electricity, Gas & Other Fuels reflected higher rates for electricity and water, which was partly related to increases in international oil prices in the December 2019 quarter. This division increased over the year to December to 1.5 per cent, compared with a decline of 3.2 per cent at September 2019, the bank said.

“Despite the higher headline inflation, underlying inflation, which excludes the immediate influence of agriculture and energy prices, remained stable and below 3.0 per cent,” the bank said.

At December 2019, the annual rate for this measure was 2.9 per cent, which was unchanged compared with the rate at September 2019.

“This underscores that the Jamaican economy continues to reflect some slack with economic growth below its potential,” the bank said.

“It also highlights that the jump in inflation is likely to be temporary as expected tempered movements in agricultural prices dampen inflation over the next three to six months,” the bank concluded.

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