Understanding Inflation

Inflation is the rate at which the price of consumer goods and services rises over time. A high inflation rate means that the value of money is significantly less than it was when compared to the same period in previous years. In simple terms, purchasing power is low as fewer items can be bought with the same amount of money.

Consumer Price Index (CPI)

The Statistical Institute of Jamaica (STATIN), the agency responsible for measuring inflation, calculates and publishes the CPI which is used to determine the country’s rate of inflation. CPI measures changes in the general level of prices for goods and services purchased by private households; it involves the annual point-to-point comparison of the prices for food and non-alcoholic beverages; housing, utilities, gas and other fuels; and restaurants and accommodation services.

According to the Bank of Jamaica (BOJ) which is mandated to promote and maintain financial system stability, an objective of the country’s monetary policy is to achieve an inflation target of 4 per cent to 6 per cent per annum which is considered ideal for the country’s long-term growth. The CPI, that is, the point-to-point inflation rate from December 2023 to December 2024, as reported by STATIN, was 5 per cent; within the target range.

Types of Inflation

Although there are several factors that contribute to inflation, the two main types are:

1. Cost Push Inflation – Caused by the increase in wages, raw materials, rent, capital, etc., required to provide a good or service.
2. Demand Pull Inflation – Happens when the demand for goods and services is higher than the supply.

Coping with Inflation

While the central bank, BOJ, works to maintain a low, predictable and stable rate of inflation, there are measures individuals can implement to mitigate its impact. The following tips may be considered:

• Invest money into assets that tend to hold value and are not easily impacted by inflation rates, such as real estate and stocks.
• Plan and budget carefully to prioritise essential expenses and cut unnecessary costs.
• Explore ways to increase income, to keep pace with rising prices and stabilise purchasing power.

For additional information, contact:

Bank of Jamaica
Nethersole Place, PO Box 621, Kingston
Telephone: 876-922-0750
Email: contact@boj.org.jm
Facebook, X: @centralbankja
Instagram: @centralbankjamaica

Statistical Institute of Jamaica
7 Cecelio Avenue, Kingston 10
Telephone: 876-630-1600
Email: info@statinja.gov.jm
Facebook, X, Instagram: @statinja