Central Bank Continues to Maintain Inflation Within 4-6 Per Cent Range

Bank of Jamaica (BOJ) Governor, Richard Byles, says the central bank continues to be successful in maintaining inflation within the  4-6 per cent target range.

Speaking at the Bank’s digital quarterly briefing on Thursday (February 19), Mr. Byles said that the inflation outturn for the 36-month period, ending January 2021, was below six per cent on 34 occasions or 94 per cent of the time.

He said that inflation surpassed the upper limit of the target on only two occasions, mainly due to temporary increases in agricultural prices as a result of drought or floods.

There were 13 occasions, when inflation fell below the lower four per cent band, mainly as a result of agricultural price volatility and declines in global oil prices.

The Governor advised that the 4.7 per cent inflation rate for the 12 months, leading up to January 2021, as reported by the Statistical Institute of Jamaica (STATIN), was within the Bank’s target range and below the 5.2 per cent recorded for December 2020.

He noted that core inflation – which excludes increases in agricultural and fuel prices – for the 12 months leading up to January of this year, was generally stable at about 3.5 per cent.

Mr. Byles said the Bank’s latest decision to maintain the policy rate on deposit-taking institutions’ overnight placements at 0.50 per cent, as announced on Tuesday (February 16), was based on the assessment that inflation will continue to trend within the 4-6 per cent range over the next two years.

He reiterated that the BOJ’s accommodative policy posture is intended to support GDP growth “and will remain so, at least, until there are signs that economic activity in Jamaica is returning to pre-COVID-19 levels”.

He said the Bank anticipates that annualised consumer prices over the next three quarters will be 4-6 per cent in March; 4-5 per cent in June; and 4.5-5.5 per cent in September.

“This outlook is lower than the one I shared… in November 2020, a change that is primarily related to the Bank’s updated view that agricultural price increases over this period will be smaller within in the context of expected better weather conditions,” he noted.

Mr. Byles added that “beyond this horizon, our forecast is for inflation to remain comfortably within the 4-6 per cent range”.