THE Bank of Jamaica (BOJ) on Tuesday said the inflation out-turn for March was better than it had expected, but warned that the fight to contain prices within its mandated target range is not yet over. The BOJ also sought to temper expectations that it could start easing its tight monetary policy stance on the out-turn.

The comments from the central bank came a day after the Statistical Institute of Jamaica (Statin) released data showing consumer prices dipped for a third-straight month in March. Prices fell by 0.5 per cent in March after dipping by 0.6 per cent in February and 0.1 per cent in January. The more keenly watched 12-month inflation rate to the end of March was 5.6 per cent. That was within the target range of 4 per cent to 5 per cent and down from 6.2 per cent in February.

“The [BOJ’s] monetary policy committee will continue to closely watch the inflation numbers and other incoming data over the ensuing months to assess the extent to which the current level of inflation will be sustained, before making a determination on whether to change the monetary policy stance,” the central bank said in a release Tuesday.

Wayne Robinson, senior deputy governor of the BOJ, later added that though the out-turn was better than expected, “we are not yet out of the woods”.

Meanwhile, economist Keenan Falconer, while welcoming the dip in inflation, was measured in celebrating too much at this time.

“With the summer period on the horizon, when inflation tends to be elevated owing to increased consumer spending, we should remain cautious in the outlook for future projections, especially in light of current geopolitical tensions, continued supply chain challenges and the expected effects of the domestic drought season,” Falconer wrote in notes to the Jamaica Observer in general comments on the out-turn.

He asserted that it would not be “until inflation can be safely anchored in the target band for a sustained period of several consecutive months,” before we can say that we are past the worst of the post-pandemic inflationary pressures.

Falconer said he doesn’t anticipate that inflation will remain in the target range for a sustained period before next year and added that while the decline in prices is good, it could be showing early signs of a weakening economy.

“Furthermore, the three consecutive months of decline in the CPI at the beginning 2024, that could also be indicative of constrained or suppressed consumer demand. We should also guard against that possibility especially in light of a similar deceleration in growth estimates for the next few years,” he continued in his notes to the Business Observer.

For his part, Adrian Stokes, a financial economist and CEO of Quantas Capital, an alternative asset management company, the inflation figures mean the BOJ should start signalling an about-turn in its monetary policy stance.

“It’s clear that the central bank needs to start indicating to the market that a lower policy rate is imminent,” Stokes told the Business Observer. He reiterated his position that “Jamaica doesn’t have an inflation problem. In other words, the inflation that we experience is cyclical [temporary] or related to factors outside of our control. In fact, most of the factors that led to heightened inflation have now normalised. And with that we have seen Jamaica’s inflation back within range,” Stokes continued. He, however, adds that his words are not to be construed as saying that “inflation won’t oscillate or temporarily move outside of target [range] due to cyclical factors like food and energy prices.”

But he said, “The signs are clear that the restrictive monetary policy has started to have real effects. Loans and advances from the banking sector to the private sector have slowed materially and interest rates in the private credit market are significantly elevated. This is happening at a time when the economy has adjusted to its pre-COVID level of slow real economic growth.”

And he warned that the real risk the central bank continues to run is a “material fall-off in real economic growth occasioned by monetary policy being too tight”.