BoJ outlines factors influencing inflation rate shortfall

KINGSTON, Jamaica — Finance and Public Service Minister, Dr Nigel Clarke, today released official correspondence from the Bank of Jamaica (BoJ) outlining factors resulting in Jamaica’s inflation target shortfall as at June 2018.

In September 2017, the Government set a medium term inflation target of 4.0 to 6.0 per cent, to be achieved and maintained by the BoJ from April 2018 onwards.

However, between April and June 2018, the 12-month rate fell below the lower 4.0 per cent band.

It is against this background, that the BoJ was required to explain the reasons for the deviation to the finance minister and nation, and outline the actions being taken to rectify the anomaly.

According to the BoJ correspondence, which was issued during a press briefing at the ministry, the lower inflation out-turn, as at June 2018, primarily reflected the impact of a stronger than anticipated reversal in agricultural prices in the March 2018 quarter; lower than forecasted inflation; and a reduction in the pass-through of oil prices to inflation.

Additionally, domestic demand conditions were assessed and determined to be weaker than originally expected.

The document further notes that while the BoJ projects that inflation for the September and December 2018 quarters will remain close to 3.5 per cent (just below the target’s lower limit and band limit of the Monetary Policy Consultation Clause), inflation will rise to the initial target’s midpoint by June 2019, and broadly remain at that level over the medium term.

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