Jamaica’s central bank (BOJ) was granted independence in 2021 but they seem to be making a mess of it. For much of last year they fiddled around telling the country that inflation was well under control and that it would remain within the band of 4-6 percent for two years, that’s before they found out that it wasn’t.
They informed the Ministry of Finance in April last year, why they could not increase interest rates as that would trim economic growth. In May, they made an erroneous statement that inflation was still getting higher when the underlying data was suggesting that it was improving and close to their target.
According to BOJ inflation was 11.8 percent in April and would get worse over the next two months.
ICInsider.com advised that they were wrong and that inflation was running close to the target since October and therefore was not getting worse but was improving.
According to the BOJ after its meetings held on 12, 13 and 18 of May 2022, “the Monetary Policy Committee (MPC) noted that inflation at April 2022 of 11.8 percent was higher than the outturn at March 2022 and represented the ninth consecutive month that inflation has been above the Bank’s target range of 4.0 to 6.0 percent. While inflation is forecasted to rise further over the next two months, the Bank forecasts inflation to fall in the second half of the year, consistent with consensus forecast for a fall in commodity prices. This means that the public should start to see lower inflation rates each month, beginning in the second half of 2022, as long as tensions between Russia and Ukraine do not escalate and inflation among Jamaica’s trading partners falls.”
The latest data from Statin is once more confirming what we stated last month and casting serious doubts on the authority of the central bank.  Statin’s latest reading on inflation is 0.3 percent for May with the year or year rate down to 10.8 percent, which is down 100 basis points from the April reading. The monthly rate for May is the lowest since November last year with zero inflation and April with negative 0.5.
Since October last year, some seven months ago even before the interest rate hikes took effect, inflation was just over 6.4 percent per annum. With an average of 0.535 percent per month. For the period from December last year, the average rate is 0.547 percent per month, but since January it is running at 5.46 percent per annum.
The rate is moderating, but the country is not out of the woods as yet. There are some hopeful signs for the coming months. The rate of exchange of the Jamaica dollar is now officially J$153.45 to the US dollar compared to around $156 up recently, this will cut the cost of imports and will contribute in a major way to cutting imported inflation. The recent increase in interest rates will also slow down economic activity.
The inflation trend since October last year, suggests BOJ has overdone the interest rate hike and the rate should start the downward trek before the end of the year.