BOJ says inflation rate underscores economic growth below potential
The Bank of Jamaica (BOJ) says 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 Statistical Institute of Jamaica (STATIN) earlier this week reported that the annual point-to-point inflation rate in Jamaica at December 2019 was 6.2 per cent, which represents a sharp jump when compared with the 3.4 per cent recorded at September 2019.
The BOJ said that this inflation out-turn was not anticipated and was higher than the bank’s target of four to six per cent.
The BOJ, which is also the island’s central bank, said that the higher inflation rate was primarily influenced by faster increases in food-and energy-related prices in the consumer price index (CPI).
It said that 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, and that this was primarily related to higher prices for vegetables and starchy foods — the consequence of adverse weather conditions including drought followed by heavy rains that affected the Island between June and October 2019.
The BOJ said there was also news of crop-related diseases affecting some items.
“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 BOJ said.
It said that despite the higher headline inflation, underlying inflation, which excludes the immediate influence of agriculture and energy prices, remained stable and below three per cent.
“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.
“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 BOJ added.