WHEN the Bank of Jamaica (BOJ) monetary policy committee releases its policy interest rate decision on March 29, the stance it has taken by hiking rates in September last year for the first time since December 2008, and three other times after, is not expected to change.

Not even a rate hike in the US, which economists forecast will slow economic growth in that country — especially with the Federal Reserve signalling it could raise rates another six times to 2.8 per cent — will affect what the BOJ will do, especially with Tuesday’s revelation that inflation reached 10.7 per cent in February, its highest point-to-point level since December 2010.

Dennis Jones, ex-IMF economist, told the Jamaica Observer, “the Fed’s latest actions confirm global nature of inflation trends,” acknowledging that countries across the world are facing higher prices exacerbated now by the war in the Ukraine, which has been pushing up the cost of food and fuel.

“[I] don’t see [the Federal Reserves increasing policy rates in the US] affecting [the] Jamaican stance, which was ahead of the curve. Jamaican inflation dynamics also more fragile,” he added in reply to the Caribbean Business Report queries.

“The Fed [is a] little behind [the] curve as US inflation hit 40-year highs in February 2022, 7.9 per cent, before oil prices spiked in March,” Jones pointed out.

The price of oil climbed over US$90 per arrel for first time since 2014 in February. It spiked to US$130 in early March in wake of Ukraine invasion. Prices have declined since, falling sharply to about US$95, before rising again to US$103 on Thursday. The impact at the pumps has been devastating for consumers with higher costs feeding into the price for most other items in most countries.

To combat the inflation, many other central banks have already been raising rates since late 2021 or signalling such moves.

The Bank of England (BoE) raised its key interest rate for a third-consecutive meeting Thursday to 0.75 per cent, up from 0.5 per cent, even though it softened its language on the need for further rate hikes. It had raised rates for consecutive meetings in February for first time since 2004.

Deputy governor of the BoE Jon Cunliffe voted to keep rates on hold, warning of a big hit to demand from higher commodity prices.

The BoE said inflation was set to reach around eight per cent in April — almost a percentage point higher than it forecast last month — and warned it could peak even higher later in the year.

Some commentators “suggests there is concern amongst policymakers about the possibility of inflation expectations becoming dis-anchored,” Jones pointed out.

In Frankfurt, the European Central Bank (ECB) kept its key interest rates unchanged, in February, but at a news conference President Christine Lagarde left the door open to an interest rate increase later this year, a turnabout from her position seven weeks ago. Annual inflation in the eurozone rose to a record of 5.1 per cent in January, more than double the ECB’s target, increasing pressure on the central bank to ditch its plans to keep rates on hold throughout the year.

In Brazil, the central bank increased its benchmark interest rate in February by 1.5 percentage points to 10.75 per cent and signalled another increase at its next meeting.

The Bank of Canada signalled in February it would soon start raising interest rates from record lows.

Australia’s central bank ended its A$350 billion bond-buying programme, equivalent to US$250 billion in February.

Japan remains a rare outlier. Bank of Japan Deputy Governor Masazumi Wakatabe denied speculation of early monetary tightening, saying the nation’s economy is just beginning to recover from the Covid-19 pandemic.

Faced with continued price increases proving more stubborn than initially anticipated, the BOJ has pushed rates to four per cent over the last six months. Governor Richard Byles made it clear in February that in addition to the concern about the higher than programmed price rises for the sixth-consecutive month, the monetary policy authority has its eyes fixed firmly on high inflation’s potential to spur significant depreciation of the local currency and thereby feed a cycle of even greater price escalations. “This is coupled with concerns over backwash into foreign exchange markets and accelerated depreciation of the exchange rate.”

For Jones with growth prospects worldwide more uncertain as the European war continues, inflation expectations could be fed further in Jamaica.

“We need to watch for Jamaican foreign exchange market reactions near term,” he added. His warning comes despite the Jamaican dollar recently underging a mild appreciation from J$157 to US$1 to now around J$153 to US$1.

“Rate rises [are] now adding concerns to cost of living squeeze. Watch for public unease and maybe offset measures especially for targeted or vulnerable groups or products such as energy.”

On Wednesday, New Zealand’s Labour Government announced it is slashing public transport fares by 50 per cent to reduce the impact of the cost of living crisis. Persistent calls have been coming in the UK for some mitigation, with impending energy price increases due in weeks. “Jamaica’s recent budget announcements, so far, do not have such specific offsetting measures, but Opposition and wider public calls for such are likely in coming weeks,” Jones said.