BOJ welcomes dip in inflation to target range

But no signal yet on rate cuts

BANK OF Jamaica, BOJ, has offered a comment on the latest inflation data, which shows consumer prices falling back within the central bank’s target range.

Annual i nflation for March decelerated to 5.6 per cent from 6.2 per cent in February, according to new data released by the Statistical Institute of Jamaica on Monday.

The new outturn was beyond BOJ’s expectations, especially the performance of segments of the food category, with the central bank noting that it welcomed the overall decline in prices.

March’s inflation rate was not only the second consecutive month of decline in headline inflation, “which is a positive development”, it’s also the first time prices had fallen back within target range since October 2023, BOJ said.

Inflation has been meandering in and out of the target range at intervals, but the BOJ Monetary Policy Committee, the central bank’s its interest-rate setting body, last assessed that prices weren’t likely to settle down more consistently in the 4-6 per cent target range until around mid2025. The March outturn on prices is likely to brighten the MPC’s outlook, but there is still a month to go until the committee’s next interest rate decision, scheduled for May 20, and conditions could change in the interim.

Thereafter the storm season, which begins in June, could impact future price projections were food crops, especially, to be affected.

The latest estimate of headline inflation, which is mainly influenced by food and fuel prices, was impacted by a 1.8 per cent decline in food and non-alcoholic beverages.

“While the bank had anticipated a decline for this division, the contraction was l arger than expected and reflected reductions in the prices of some agricultural produce, such as tomato, yam, sweet potato, cabbage and carrot,” BOJ said in its statement on Tuesday.

Statin reported that the effect of the dip in food prices was moderated by a 0.9 per cent rise in the ‘housing, water, electricity, gas and other fuels’ index due to higher electricity rates, and a 0.2 per cent increase in ‘transport’ because of higher petrol prices.

Monthly consumer inflation has been negative since the start of this year: with prices deflating 0.1 per cent in January, 0.6 per cent in February and 0.5 per cent in March, Statin data shows.

For more than a year, since November 2022, the BOJ has maintained its policy interest rate at 7.0 per cent, following a period of sustained rate hikes dating from the fall of 2021 to rein in inflation.

Post-pandemic inflation peaked at 11.8 per cent in April 2022.

BOJ has given no signal as to when it will likely cut rates, saying in the past that the determination will be made as data flows in over time.

On Tuesday, it reiterated that the close watch and assessment of prices and other incoming data would continue over coming months “before making a determination on whether to change the bank’s monetary policy stance.”