In a move intended to bolster transparency in his ministry, Finance Minister, Dr. Nigel Clarke, released correspondence from the Bank of Jamaica (BOJ) outlining the factors resulting in Jamaica’s inflation target falling short, as at June 2018.
The Minister said in September 2017, the Government set a medium term inflation target of 4.0% to 6.0%, to be achieved and maintained by the BOJ from April 2018, onwards.
Between April and June 2018, the 12 month rate fell below the lower band of 4.0%.
As a result of the shortfall, the BOJ was required to explain the reasons for the deviation to the Finance Minister.
The report from the BOJ explained that the low inflation out turn 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.
In addition, the BOJ said demand in the domestic market was assessed and determined to be weaker than originally expected.
The BOJ further noted that while it projects that inflation for the September and December 2018 quarters will remain close to 3.5%, inflation will rise to the initial target’s midpoint by June 2019, and broadly remain at that level over the medium term.
The bank said it has undertaken a number of policy adjustments that will help to guide inflation, over time, back into the target band.
Meanwhile, the Finance Minister said it is essential that the people of Jamaica understand the central bank’s thinking on inflation.
He further stated that the disclosure of the correspondence from the bank is consistent with his administration’s move to create an autonomous central bank.