Inflation in Jamaica continues to trend downwards, indicative of the Bank of Jamaica’s (BOJ) tight monetary stance reaping dividends.
The All-Jamaica Consumer Price Index (CPI), which measures Jamaica’s inflation declined by 0.4 per cent for April 2023, influenced mainly by a 4.2 per cent fall in the index for the division ‘Housing, Water, Electricity, Gas and Other Fuels’.
The Statistical Institute of Jamaica (STATIN), which measures inflation in the island, says the movement in the division’s index was due to a reduction in the rates for electricity, which resulted in a 12.5 per cent fall in the index for the group ‘Electricity, Gas and Other Fuels’. There was also a decline in the index for the ‘Transport’ division which moved down by 0.1 per cent.
Prices rose in ‘Food and Non-Alcoholic Beverages’.
This was mainly due to reduced costs of petrol and air travel. The inflation rate was, however, tempered by a 0.6 per cent increase in the index for the heaviest weighted division ‘Food and Non-Alcoholic Beverages’.
This was due to higher prices for some agricultural produce such as sweet potato, yam, lettuce and tomato. The point-to-point inflation rate as at April 2023 was 5.8 per cent.
This was influenced mainly by the point-to-point inflation rate for the divisions: ‘Food and Non-Alcoholic Beverages’ (10.3%) and Restaurants and Accommodations Services’ (16.8%). These upward movements were, however, tempered by a 3.1 per cent decline in the index for the group ‘Housing, Water, Electricity, Gas and Other Fuels.’
BOJ interest rate options
Given that inflation is trending downwards, the BOJ might not want to risk lowering its benchmark policy rates, which have been trending upwards but has been on paused in the last few months given the decline exhibited in inflation. The BOJ might opt continue to hold its policy rate steady at seven per cent, which it has been at for the past few months.
The Jamaican Central Bank has set an inflation target of four-to-six per cent for the financial year with inflation now hovering at 6.2 per cent up to March 2023. Inflation is the rate at which the general price level of consumer goods and services in the economy changes over time.
When inflation occurs, more money is needed to purchase the same quantity of goods and services.