Inflation Rate Slows in 2014

The Bank of Jamaica (BoJ) is reporting a slower rate of inflation for the 2014 calendar year, over 2013.

Governor, Brian Wynter, who describes this development as a “change” in the inflation environment, says the 2014 figure ended at 6.4 per cent, compared to 9.5 for the previous year.

Meanwhile, he says the figure for the 2014/15 fiscal year is “likely” to be below the initial seven to nine per cent target, “clearly lower than we had originally anticipated.”

Speaking at media briefing at the BoJ, in downtown Kingston, on January 21, Mr. Wynter said the October to December 2014 quarter recorded negative inflation, coming out at -0.8 per cent.

He attributed this development to price adjustments, particularly during December, resulting primarily from increased agricultural outputs consequent on the sector’s recovery from protracted drought earlier in the year.

Noting that declining global oil prices are yet to be fully translated into lower prices locally, Mr. Wynter anticipates that “we will see some more downward pressures on prices arising from what has happened already, internationally.”

Against this background, the Governor advised that the outlook for the 2015 calendar year, focusing on the first six to nine months, and the 2015/16 fiscal year, has also “changed”.

“So, when we (BoJ) look ahead to September 2015, the inflation rate that we are currently forecasting will fall within the range of 3.0 to 5.0 per cent. The (2015/16) fiscal year inflation (rate) is going to incorporate a projection that goes further, and will have to take (into) account the prospect of whether we think oil might rise, somewhat. Therefore, there may be factors that put that rate up, higher than the three to five per cent,” he said.

Mr. Wynter explained that the BoJ is currently undertaking the necessary technical work that will inform the 2015/16 fiscal year inflation target, to be set by Finance and Planning Minister, Dr. the Hon. Peter Phillips, and announced when the Budget is unveiled.

As it relates to the anticipated timeframe when reduced oil prices are expected to be fully passed through to consumers, Mr. Wynter said that in Jamaica, “we do get the pass-through pretty quickly.”  He said this will be contingent on a “range of factors,” pointing out that some aspects of this process “will play through pretty quickly, but others will take some time.”