While the Bank of Jamaica (BOJ) has remained vigilant in presiding over an inflation rate that has remained within the four to six per cent band despite the contraction of the economy, other countries, particularly the United States (US) and other developed nations, have seen their inflation rates rising.

In the US, inflation in April accelerated at its fastest pace in more than 12 years as its economy begins recovery and energy prices rise.

Overall prices in April jumped 4.2 per cent year over year, the largest gain in the headline Consumer Price Index (CPI) data since September 2008.

Energy prices in the US have jumped 25 per cent from 2020 including a hike of 49.6 per for gasoline and 37.3 per cent for fuel oil.

“As the cyclically sensitive components of Consumer Price Inde are still rising at a modest pace, we doubt reports of inflation increasing will change the view of officials that inflationary pressures are ‘largely transitory’. It’s just that there’s a lot more ‘transitory’ than they were expecting,” wrote Michael Pearce of Capital Economics.

UK INFLATION RATE MORE THAN DOUBLED

Across the pond, the annual UK inflation rate more than doubled in April, as a rise in energy and food costs drove prices higher. According to the BBC, the jump to 1.5 in April from 0.7 per cent in March, means consumer prices are rising at their fastest rate since March 2020 at the outset of the pandemic. In the UK, the government has set the Bank of England an inflation target of two per cent.

The Federal Reserve in the US is still aiming for an inflation rate in the two per cent range but with that rate rising there are concerns that interest rates will have to be increased.

Addressing the question of rising inflation in countries that are  traditionally Jamaica’s leading trading partners and the impact of this, the Bank of Jamaica’s senior deputy governor, Dr Wayne Robinson said: “We are concerned about the level of inflation that is happening globally. It’s not just taking place locally, but we remain data driven. What has been happening globally could be due to increased optimism about the reopening of economies. There has been some amount of pent up demand for a number of commodities. This demand is now running ahead of supply. We are seeing significant increases in some of these commodities that are having a spill-over effect on Jamaica.

“Our view is that although food prices in Jamaica over the next quarter or so will increase, when we look at the broad range of commodities that people consume and we put that all together, we are still convinced that the overall level of inflation in Jamaica will remain within the four to six per cent band.”

Robinson did however point out that there is a risk that inflation will move closer to the five to six per cent mark but stay within the target band. He stressed that while prices may remain elevated, he believes this inflationary pressure will be temporary with supplies coming back on stream.

“There will be some rebalancing in the international global markets for oil and grains over time, but the consumer is still under stress. This is going to temper the rate at which some of these prices are passed back to the consumer. We continue to watch it and look closely at the data and will inform the public as things evolve and our forecasts change,” said Robinson.