BOJ Keeping Inflation Within 4-6 Per Cent Target

Bank of Jamaica (BOJ) Governor, Richard Byles, says that the Central Bank continues to be “very successful” in guiding inflation within the four to six per cent target range.

He noted that over the 40 months leading up to April 2021, inflation has been below the six per cent upper bound of the target range on 38 occasions or 95 per cent of the time.

“As I have said in the past, the main reason for inflation going above the target on the two occasions was temporary increases in agricultural prices due to either droughts or floods,” the Governor said.

Conversely, Mr. Byles said inflation fell below the lower end of the target on 15 occasions over the period, again, largely due to volatility in agricultural prices as well as declines in international oil prices.

Mr. Byles, who was speaking during the BOJ’s recent digital quarterly briefing, said that, going forward, the near-term outlook is lower than the one shared in February 2021, a change that is primarily related to the updated view of the BOJ Monetary Policy Committee (MPC) that agricultural price increases over this period will be smaller than previously anticipated, given expectations for better weather conditions.

The projections, as determined by the MPC, is for inflation to range between 3.5 and 4.5 per cent for the April to June quarter, 4.5 and 5.5 per cent for the July to September period, and 3.5 and 4.5 per cent between October and December 2021.

Beyond December 2021, the forecast is for inflation to remain within the target range of four to six per cent.

“Inflation is projected to average 4.8 per cent over the next two years, a forecast that anticipates that oil and grain prices will not rise much beyond current levels,” Mr. Byles said.

Mr. Byles said the BOJ anticipates that this will directly affect domestic transport and processed food inflation, but is expected to be tempered by subdued domestic agricultural food price inflation.