Bank of Jamaica (BoJ) Governor, Bryan Wynter, is reporting that the inflation rate recorded for the April to June quarter averaged approximately 1.5 per cent.
This figure, he notes, is significantly lower than the revised forecast range of between three and five per cent which the BoJ announced in June, subsequent to implementation of the revenue measures outlined by Finance and Planning Minister, Dr. the Hon Peter Phillips, in the 2012/13 Budget.
Speaking at the BoJ's quarterly briefing at its downtown Kingston offices on Thursday (August 23), Mr. Wynter said the reduction in the inflation rate was largely due to the lower than anticipated impact of the revenue measures implemented. This, he added, was complemented by reduced electricity and automotive fuel costs, consequent on lower crude oil prices.
Of note, the Governor pointed out, was what he described as no “noticeable pass-through” to prices of the increased depreciation of the exchange rate during the quarter, “because of lower international commodity prices and competitive pressures in an environment of weak domestic demand."
For the July to September quarter, Mr. Wynter said the BoJ anticipates an inflation outturn similar to the one to two per cent range recorded in the June quarter. This forecast, he indicated, is reinforced by the reported 0.3 per cent deflation recorded in July.
"The July outturn reflected the impact of the sharp reduction in the cost of cell phone calls on the overall price level, lower water and electricity rates, and the persistent influence of competitive pressures in the face of weak domestic demand. These factors offset the inflationary impulses from the tax measures,” the Governor informed.
For the remainder of the current quarter, Mr. Wynter said the BoJ is anticipating further reductions in communication and electricity costs. He was, however, quick to point to the possibility of a spike in food prices from the tax measures, coupled with increases in the cost for grain on the international market.
"Adverse weather conditions in major producing countries, particularly the United States of America, have led to growing concerns about the supply of grains and consequently, higher prices over the next few quarters. The usual increase in prices associated with the demand for back-to-school items is also expected, later in the quarter. There should be negligible pass through to prices of the recent depreciation in the exchange rate, as persistently weak demand conditions continue to restrain increases in prices,” he outlined.
Regarding inflation for the remainder of the 2012/13 fiscal year, Mr. Wynter said this is trending towards the lower end of the forecast range of between 10 and 12 per cent, adding that based on “current circumstances,” the figure “may well fall below this range."
"The more benign outlook largely reflects the anticipated impact of the generally tight fiscal stance, as well as the forecast for most international grains prices to remain elevated for the rest of the fiscal year, in the context of the relatively weak global demand,” he added.
Mr. Wynter pointed out that despite the “better-than-expected” outturn for the year to date, and the current outlook for relatively “muted” price pressures over the next few quarters; the BoJ intends to assess additional data, particularly relating to “volatile” international food prices, before giving consideration to a downward adjustment to the 2012/13 inflation target.