COURTNEY Allen, chief economist at the Bank of Jamaica (BOJ), is strongly purporting that inflation is to be viewed as the “heartbeat of the economy”. Allen gave his views at the first of two BOJ seminars presented under the theme ‘Demystifying Inflation’ at the bank’s auditorium on Thursday (June 6).
Allen’s heartbeat comment rested on the principle of inflation being not too high or too low but striking the right balance in the middle.
He stressed that inflation must be kept at medium range, as when too high it stifles growth and affects productivity and often becomes the “enemy of the poor”. When too low (zero and below), the economy runs the risk of falling into deflation (which is the opposite of inflation), which can see an economy slipping into recession and zero economic growth being attained.
Allen instead endorsed and proposed the ideal of low —stable—predictable inflation, which he believes can do wonders for the economy, as this can facilitate increases in purchasing power, salary and the demand for goods, all of which, he proffered would be beneficial to the consumer.
Jamaica currently targets inflation at a rate of 4.0- 6.0 per cent. This rate was set by the minister of finance in alignment with current economic realities and the need to stimulate more growth within the economy. A strategy noted for maintaining this rate is lowering interest rates so that more people can borrow and produce.
Allen further offered that there are hopes to gradually achieve a 2.3 per cent rate of inflation in the near future, as this is in keeping to the level of Jamaica’s current trade partners.
“This ideal is, however, on hold in the interim as a move to achieve this now will call for more restrictive measures, that is, increase in interest rates, which the economy cannot deal with currently.”
Leave A Comment