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Story Highlights

  • Inflation during the April to June quarter was 1.2 per cent, well below projections
  • The figure is “way below” the 2.7 per cent recorded for the January to March quarter
  • Inflation for the July to September quarter is projected to range from two to three per cent

The Bank of Jamaica (BoJ) is reporting that inflation during the April to June quarter was 1.2 per cent, well below the two to three per cent range projected in May.

Making the announcement at the BoJ’s quarterly media briefing on Wednesday, August 21, Governor, Brian Wynter, who described the outturn as “encouraging”, said the figure is “way below” the 2.7 per cent recorded for the January to March quarter.

Addressing journalists at the BoJ’s auditorium in downtown Kingston, Mr. Wynter attributed the June quarter outturn “largely’ to the lagged impact of exchange rate depreciation and the impact of drought conditions on the prices of some agriculture items.

“But the impact of these factors on inflation was, in fact, lower than what we had anticipated. The lower than projected inflation also reflected in the impact of a sharp reduction in energy costs, which was not expected, and also the weaker than anticipated demand conditions,” he outlined.

Mr. Wynter said inflation for the July to September quarter is projected to range from two to three per cent. He pointed out that if this materializes, the rate will be below the outturn for similar periods for each of the previous five years. The inflation forecast for the September quarter, he points out, is expected to be influenced mainly by the increases in the prices of domestic agriculture produce and processed foods.

“In addition, inflation in the period is expected to reflect the impact of higher prices for crude oil and the effect of the seasonal increase in demand that is related to the summer holidays and back to school preparations,” he added.

The Governor pointed out however, that the announced reduction in communication costs and “persistent” weak demand conditions are expected to moderate the impact of these factors on overall price levels. He disclosed that data released by the Statistical Institute of Jamaica (STATIN), shows July recording an inflation rate of 0.5 per cent.

Mr. Wynter said despite the “lower than expected” inflation outturn for the first four months of the fiscal year, the Bank is maintaining its forecast range of 8.5 per cent to 10.5 per cent for the 2013/14 fiscal year.

This, he explained, is based in the expectation of domestic prices reflecting the impact of higher international commodity prices, particularly crude oil, as also exchange rate depreciation. Seasonal increases in domestic agricultural produce prices are also expected to contribute to inflation for the period.

Mr. Wynter said a “cautious” assessment of near term inflation risks suggests that the figures recorded will be close to the upper end of the forecast range for June to September, and the fiscal year.

These risks, he pointed out, largely relate to the recently announced increase in transportation costs and “possible” adjustments to utility costs “depending on decisions made by the regulator.”  Additionally, he pointed to the risk of higher oil prices facing Jamaica, depending on the developments in the Middle East.

In noting that adverse weather is also a potential high risk to the forecast, the Governor said weaker than anticipated domestic demand conditions is expected to continue to be the main downside risk, “hence our assessment of maintaining the 8.5 to 10.5 per cent range.”

“So… we are doing better than expected in the first four months of the year, but there are factors that are pushing up inflation. Whether those factors will be outweighed by the factors that are muting or slowing down inflation, it’s difficult to say,” he noted.

Mr. Wynter, however, assured that, “we believe the risks are reasonably balanced. and what that boils down to is roughly where inflation is today…the most recent 12-month (range) comes out at… between nine and 10 per cent.”