Pensioners Urged to Support Low Inflation Measures

Governor of the Bank of Jamaica (BoJ), Bryan Wynter, has urged pensioners to lend their support to the reforms and institutional arrangements that contribute to a lower and more stable inflation environment in the wake of the successful completion of the Jamaica Debt Exchange (JDX) and the signing of the Standby Agreement with the International Monetary Fund (IMF).
“As inflation becomes low and stable, you can be more comfortable in your expectation that the returns on your investments will be more stable and your income in retirement will maintain its purchasing power,” he said.
“Businesses will be able to plan with greater certainty, thereby minimising the volatility in consumer prices that stem from the productive process. and you can plan to enjoy your retirement years in a more relaxed frame of mind,” Mr. Wynter added, as he addressed the Caribbean Community of Retired Persons Financial Retirement Planning Seminar held recently in Kingston.
The BoJ Governor, whose presentation focused on the factors that trigger inflation and how it affects pensioners, said the issue was central to the financial planning of persons, who collect a pension, and was of even greater significance for those on a fixed income.
He observed that over the years, Jamaica had experienced volatile and high inflation that had affected the country’s ability to “plan effectively and to estimate ahead of time what the real rate of return on savings and investments was likely to be.”
In addition, continuous high and volatile inflation can influence workers to demand higher wages in an effort to maintain their purchasing power and for business persons to set higher mark-ups on goods and services in an effort to sustain profit levels.
Governor Wynter noted that given Jamaica’s high propensity to import, any significant depreciation in the exchange rate will contribute to increases in the prices being faced by producers and consumers. The converse, he said, was also true.
“Recently, we have been observing a general appreciation in the value of the Jamaica Dollar largely due to investors’ confidence that the macroeconomic fundamentals are improving. Ultimately, this should translate into lower and more stable prices for consumers,” he stated.
The BoJ is forecasting inflation of between 7.5 to 9.5 per cent for 2010/2011, with the rate to be close to the bottom of the range, based on the slow recovery in the global economy, the containment of international commodity prices, and the relative stability of the Jamaican Dollar.
For the medium-term, the economic programme envisions that the rate of inflation should fall to about 6.0 per cent a year by 2013/14, again based on the relative stability in the prices of international commodities and the value of the Jamaican Dollar.