Inflation optimism - March data offers hope for BOJ target
The Statistical Institute of Jamaica on Tuesday released new data on inflation which shows that the indicator is moving significantly for the first time in seven months, giving some hope that the central bank may meet its inflation target by June if the trend continues.
But this time, in a break with tradition, the agency opted to release the data at a press conference to drive public conversation about economic numbers. Usually, Statin would only publish data and the accompanying press releases on its website, on a preset schedule.
The computation of the inflation rate for March – based on the All Jamaica Consumer Price Index – was 0.8 per cent, an increase largely due to a 0.9 per cent uptick in the heavily weighted Food and Non-Alcoholic Beverages segment of the basket of goods and services constituting the Consumer Price Index (CPI).
A breakdown of the three regions surveyed by Statin showed increased movements in all three regions: the index for the Greater Kingston Metropolitan Area, or GKMA moved up by 1.0 per cent, other urban centres rose 1.0 per cent, and rural areas moved up by 0.6 per cent.
The CPI index measures change in the general level of prices of consumer goods and services purchased by private households.
Monthly inflation has been tracking at or near zero per cent in the prior four periods: November 0.0 per cent, December 0.1 per cent January 0.2 per cent, and February 0.1 per cent.
The March out-turn is a return to levels last seen in late summer and early fall: August 0.9 per cent; September 1.1 per cent, and October 0.7 per cent.
Altogether, said Statin Director General Carol Coy – who indicated that she had called the press conference to stimulate public discussion around the deep data sets being produced by the state agency – the annual inflation rate for 2018 was 2.4 per cent, the second-lowest annual rate since 1977.
The inflation rate in 2017 was 5.2 per cent.
The Bank of Jamaica has been slashing its policy interest rate continuously over several quarters in the hope that the pass through of cheaper credit to the real sectors would lead to more consumer demand; and that the resulting effect would drive inflation back within the central bank’s target range of 4-6 per cent.
BOJ’s last downward adjustment to its policy rate happened in February, which was cut from 1.75 per cent to 1.5 per cent. In 2018, the policy rate was adjusted five times, resulting in 150 basis points of cuts.
The inflation rate for the fiscal year ending March 2019, Coy said, was 3.4 per cent. That figure approaches the low end of the BOJ 4-6 per cent target range. The range is a medium-term goal that is meant to enhance economic growth.
For March, Coy said the higher prices for vegetables such as sweet peppers, carrots and cabbage had a strong influence on the movement of inflation, with the index for the class vegetables and starchy foods moving up by three per cent.
Additionally, housing, water, electricity, gas and other fuels increased by 1.5 per cent. This resulted from a 2.7 per cent rise in the index for the group electricity, gas and other fuels, which itself was influenced by higher electricity rates.
Goods and services in the CPI basket are divided into 12 major expenditure divisions – Food and Non-Alcoholic Beverages; Alcoholic Beverages and Tobacco; Clothing and Footwear; Housing, Water, Electricity, Gas and Other Fuels ; Furnishings, Household Equipment and Routine Household Maintenance; Health; Transport; Communication; Recreation and Culture; Education; Restaurants and Accommodation Services; and Miscellaneous Goods and Services
The most heavily weighted categories are Food and Non-Alcoholic Beverages which have a weighting of 37.4; Housing, Water, Electricity, Gas and Other Fuels is weighted at 12.8; and Transport also has a weighting of 12.8.