2.8 Per Cent Inflation Recorded for Second Fiscal Quarter

Inflation for the second quarter of the current fiscal year was 2.8 per cent, reflecting a similar average for the September quarters of the past six years.
This relatively moderate out-turn for the July to September quarter was significant in light of the continued pressure of international oil prices and the effects of two hurricanes, Bank of Jamaica Governor, Derick Latibeaudiere has said.
He was speaking at the quarterly press briefing of the Bank of Jamaica (BoJ) in Kingston, yesterday (November 11).
Mr. Latibeaudiere said the moderate inflation was the result of two major factors, including the tight management of base money by the Central Bank and the relative stability that prevailed in the foreign exchange market.
“In the context of the management of the monetary base, I should note that monetary expansion has consistently remained within the targets set out in the country’s financial programme, and that for the first half of this fiscal year, the growth in base money was 6.1 per cent relative to the target of 7 per cent,” he said.
The Governor added that the tight rein on base money restricted core inflation to an estimated 1.1 per cent for the review quarter.
He also pointed out that the relative stability in the exchange rate was underpinned by growing investor confidence, which was largely attributable to continued improvements in the domestic economy.
Mr. Latibeaudiere explained that inflation for the September quarter was influenced mainly by the seasonal increases in the prices of agricultural commodities, which was exacerbated this year by the effects of Hurricane Charley.
Other factors, which influenced the 2.8 per cent inflation included adjustments to the cost of postage and electricity rates as well as higher international oil prices.
Mr. Latibeaudiere informed that in spite of the continued restraint in monetary policy, the marked reduction in inflation usually observed in December quarters of previous years was not expected to materialize in 2004. “This outlook in based on the expectation of a shortfall in agricultural production resulting from the recent hurricanes. In addition, we expect the basket to reflect the pass-through of higher international oil prices,” he said. Meanwhile, inflation for the month of October was 3.3 per cent. According to the BoJ Governor, although a comprehensive analysis had not yet been undertaken, the major price impulses stemmed from items within the food and drink, fuels and other household supplies groups. Mr. Latibeaudiere is projecting that inflation for the December quarter should not exceed 6 per cent.
“The bank also anticipates that with the normalization of some agricultural supplies, non-core inflationary impulses will moderate in the March 2005 quarter. In this context, our preliminary forecast of headline inflation for fiscal year 2004/05 is in the range of 10.5 to 11.5 per cent,” he said.