Today the Bank releases the Quarterly Monetary Policy Report for the January to March
2016 quarter.
Inflation at March 2016 has fallen to a historic low of 3.0 per cent. This is lower than the
3.7 per cent recorded at December 2015 and the 4.0 per cent at March 2015. It was also well
below the Bank’s target range of 5.5 per cent to 7.5 per cent for FY2015/16 and represents the
lowest fiscal year outturn since FY1966/67.
Contributing to the inflation outturn for the fiscal year was a fall of 1.3 per cent in
consumer prices in the March quarter. This fall in prices was mainly influenced by declines in
energy and transport-related costs and domestic agricultural food prices. The fall occurred
despite exchange rate depreciation of 1.4 per cent for the quarter. Inflation continued to decline
in April with STATIN reporting that it was minus 0.4 per cent, pushing annual inflation down to
2.4 per cent.
Underlying inflation is also low and falling. The Bank’s measure of core inflation that
excludes changes in agriculture and fuel prices was 3.0 per cent at March 2016, relative to 5.5
per cent the year before.
While some of the slowdown was caused by lower international oil prices, the low level
of inflation is the result of Bank of Jamaica’s monetary policy supported by the strong fiscal
policy stance of the government. The fiscal anchor has proven to be a powerful force for
macroeconomic stability. In line with this, inflationary expectations continue to be firmly
anchored in single digits. The Bank’s latest inflation expectations survey, conducted in February
2016, indicated a slight fall in expected inflation 12 months ahead to 4.3 per cent from 4.4 per
cent in the December 2015 survey.
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