BOJ encouraged by declining inflation rate
Published:Friday | August 19, 2022 | 9:16 PM
The Bank of Jamaica (BOJ) is encouraged by the declining out-turns recorded in the last three Consumer Price Index (CPI) reports, Governor, Richard Byles, has said.
The CPI, which measures variations in commodity prices for consumers, is administered by the Statistical Institute of Jamaica.
Byles noted that having peaked at 11.8 per cent in April 2022, the rate of inflation fell to 10.9 per cent in May and June, and to 10.2 per cent in July.
“Declining international commodity prices, relative stability in the exchange rate, tighter liquidity management by the BOJ, and higher interest rates have allowed for this trend,” the Governor informed.
He was speaking during the Bank's digital quarterly media briefing on Friday.
Byles said notwithstanding this “good trend”, the BOJ believes these conditions have not sufficiently solidified to ensure that inflation is sustainably placed on a downward path towards the institution's four to six per cent target range, adding that “there remains some significant risks of reversal”.
He emphasised that the fragile geopolitical conflict between Russia and Ukraine, and Europe's knock-on commodity price risks “cannot be ignored”.
Additionally, Byles said reported labour shortages in several sectors of the economy and pressures from recent local inflation experiences “carry the potential for future wage adjustments that could be inflationary”.
Further, the Governor said high inflation in the United States and other trading partners has prompted a programme of faster monetary adjustment, noting that this could cause capital outflows from Jamaica and exchange rate depreciation, “if domestic monetary policy is not properly aligned”.
“These are some of the factors the Bank's Monetary Policy Committee (MPC) considered when it met on August 16 and 17, 2022, and voted to increase the policy rate by a further 50 basis points to six per cent, effective August 19, 2022,” he told journalists.
“This current decision has resulted in a cumulative increase in the policy rate of 550 basis points since October 2021 and has taken the policy rate to a level that the Committee considers appropriate,” Byles pointed out.
-JIS News
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