Gov’t. Committed to Single Digit Inflation – BOJ Governor

Bank of Jamaica (BOJ) Governor, Derick Latibeaudiere, has said that while efforts to achieve single digit inflation for the next fiscal year would be challenging, the Government was committed to putting the necessary measures in place to attain that goal.
“The Government’s ability to deliver single digit inflation is going to be challenging but we will give it our best shot,” he said, while addressing a press briefing today (February 18) at the bank’s headquarters in downtown Kingston.
Finance and Planning Minister, Dr. Omar Davies, at the recent signing of the Memorandum of Understanding between Government and trade unions, said that the administration would undertake to pursue policies, which would, over the next two years, contain inflation at less than 10 per cent per annum, achieve growth of some 3 per cent and produce a balanced budget by 2005/06.
The BOJ is projecting headline inflation at about 1.0 per cent for the quarter ending March, with an estimated inflationary outturn of 14.5 per cent to 15.5 per cent for the fiscal year, assuming that there is continued relative stability in the foreign exchange market and the continuation of the downward trend in core inflation.
Dr. Latibeaudiere lauded the agreement reached between the Government and the unions, noting that it could only be in the country’s interest. Suggesting that the private sector should copy the move, the BoJ Governor said: “For the measure to be effective, it cannot only be public sector wage restraint. It has to be right across the board. We should have general reduction in aggregate demand, that is what is going to help the country in the long run”.
Turning to the foreign exchange market, he said there was relative stability in the December quarter, except for a period of instability in October during which the BoJ sold foreign exchange to augment supply in the market. The weighted average selling rate depreciated by 1.5 per cent in the review quarter relative to 3.3 per cent in the corresponding quarter of the previous year.
On interest rate, Mr. Latibeaudiere said that the quarter has started on a positive with the bank lowering interest rates on Monday, February 16. This is the 10th time since April 2003 that the bank has cut its signal rates. Monday’s reduction was the fourth time for this quarter.
The BOJ Governor said the reductions were facilitated by sustained confidence and stability in the financial markets, with stability in the foreign exchange market in the December quarter continuing into this quarter. Continued buoyancy in tourism earnings, an adequate level of reserves and moderate Jamaican dollar liquidity, has been the main factors stimulating and influencing the continued stability in the foreign exchange market, he pointed out.
In terms of the Net International Reserves (NIR), Mr. Latibeaudiere said this was at US$1.482 billion, reflecting over 20 weeks of imports.