BOJ Reports to Finance Minister on Inflation Out-Turn

The Bank of Jamaica (BOJ) Monetary Policy Committee (MPC) has written to the Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, as required by law, explains the factors causing the latest inflation rate out-turn of 8.5 per cent, exceeding the institution’s four to six per cent target range, and measures taken to restore it within the band.

Governor, Richard Byles, said the out-turn for the 12 months leading up to October 2021, as released by the Statistical Institute of Jamaica (STATIN), represented the third successive month that inflation has risen above the Bank’s target range.

Speaking during the BOJ MPC quarterly digital media briefing on Friday (November 19), Mr. Byles said significant increases in international commodity and shipping prices were the principal contributor to spiking domestic inflation.

Additionally, the Governor said there were significant upward price inducements from sharp increases to agricultural prices and one-off spikes in regulated transportation and energy prices.

“These shocks have led to elevated inflation expectations and second-round movements in the prices of goods and services, like rental rates. The MPC’s decision to further reduce the level of monetary policy accommodation is designed to limit the second-round effects of these shocks,” he noted.

Mr. Byles said the MPC anticipates that annualised consumer price inflation will continue to breach the upper limit of the Bank’s target range over the next 10 months, from November 2021 to August 2022, and is projected to peak in the range of eight to nine per cent.

“This inflation forecast reflects the continued impact of higher international commodity and shipping prices on domestic processed food, services, and energy price inflation,” he indicated.

The Governor noted that past agricultural food price increases and hikes in regulated transportation fares and the electricity tariff will also support higher inflation over the next 10 months.

“With the tightening of monetary policy, we anticipate that headline inflation will return to the four to six per cent target range in the latter part of 2022,” Mr. Byles advised.