CONSUMER prices ticked higher for a third-straight month in July as the prolonged drought continues to cut supplies of agricultural produce, sending up the cost of dining both at home and at restaurants, but analysts say they don’t expect the Bank of Jamaica (BOJ) to change its stance on interest rates in the near future.

The inflation data the Statistical Institute of Jamaica reported Tuesday showed that in July overall consumer prices rose 6.6 per cent from a year earlier. That was up from a 6.3 per cent annual rise in June and 6.1 per cent in May. The latest figure remained far below last year April’s peak of 11.8 per cent as red-hot inflation eased with the shock to food and energy prices from the war in Ukraine faded. For July alone, consumer prices rose 1.1 per cent, its fastest pace for a single month since October last year.

Leading the price increases is the rising cost of food.

In the last year, food prices have risen by almost twice the level of general price increases in the economy, having gone up 11.3 per cent in that time period. In July alone, higher costs for vegetables, tubers, plantains, cooking bananas and pulses led price increases.

“The prevailing drought conditions continued to adversely affect the supply of agricultural produce such as cabbage, Irish potato, tomato, sweet pepper and yellow yam, resulting in consumers paying higher prices for these items,” Carol Coy, director general of Statin, told reporters in a media briefing to announce the figures.

Helping to stoke the numbers as well is the rising cost of restaurant meals. The cost of dining out at restaurants or purchasing street food has gone up 12.4 per cent in the period.

The BOJ, economists and investors, though, pay particular attention to core inflation figures for signs of where price pressures might be headed and the actions the central bank may take to mitigate the impact. In May, the last date for which core inflation figures are available publicly, the BOJ said the figure was 4.2 per cent which, while lower than the April out-turn, was still itself above the lower bound of the central bank’s inflation target range of 4 to 6 per cent.

“Core inflation is likely, however, to trend slightly above the previous forecast over the next two years due to an upward revision to services,” the BOJ said in minutes from its monetary policy committee (MPC) meeting in June.

But, as the powerful rate-setting MPC digests these figures and gets ready to meet today and tomorrow ahead of announcing its decision on interest rates on Friday, analysts say they are expecting no change in the rate which has been at 7 per cent since November last year.

“As indicated many times before, Jamaica doesn’t have an inflation problem. The global factors that drove local inflation have normalised, and with that we have seen a moderation in local inflation,” Dr Adrian Stokes, CEO of Quantas Financial Group, told the Jamaica Observer.

“The key risk going forward is how very tight monetary conditions will impact real economic growth,” he said, indicating a long-held belief that the central bank has overtigthened, which may soon start impacting growth figures.

“The post-pandemic real GDP bounce has ran its course,” Stokes continued. “The economy has reverted to trend growth at the same time when tight monetary conditions are starting to have real effects.”

He later clarified that those real effects are the impact the higher interest rates are having on capital markets.

“Many businesses have been forced to delay or abandon projects due to high finance costs. This will only continue as interest rates stay high for a long period.”

Already the central bank has warned that when the final assessment is done, “growth in the Jamaican economy for the March 2023 quarter could be lower than forecast due to lower economic activity in agriculture, construction, tourism and allied services, and manufacturing”.

“An assessment of leading indicators also signalled weaker-than-projected domestic real GDP growth for the June 2023 quarter, compared to the bank’s previous forecast,” it said in its MPC minutes from its June meeting.

Kwame Brooks, head of trading and treasury at the JMMB Group, said he too expects the BOJ to maintain rates at the current 7 per cent at the end of this week’s MPC meeting.

Brooks cites that inflation over the last three months has been just slightly above the top end of the BOJ’s target range, and the fact that even though the Federal Reserve — the US central bank — raised rates recently, consensus is that it is close to its rate-hiking cycle and may not hike rates again this year, especially with the recent downgrade of USA’s credit rating, leading to an increase of the risk-free rate globally.

“Barring disaster or geopolitical factors, inflation is expected to be sustained in the BOJ target range by December, hence the BOJ may consider reducing rates later this year. The BOJ is expected to closely monitor the data leading to the peak of the hurricane season and act as warranted,” Brooks noted.

Still, there are those who believe rates could go higher.

“We do believe at 7 per cent the rate is pretty close to terminal rate, give or take another 25 basis points,” Septimus Blake, CEO of NCB Jamaica, said while answering questions about interest rate hikes on products from NCB during the NCB Financial Group investor briefing last Thursday.