No inflation jitters, despite price increases
Despite recent spikes in the cost of several food items in shops and supermarkets, the central bank says there were no inflation jitters and it remained optimistic that it will remain within the range it has forecast for fiscal year 2016/17.
John Robinson, the Senior Deputy Governor at Bank of Jamaica (BOJ) said the latest information he has on increase in consumer prices is up to May, at which point it had risen by 0.1 per cent for the month and year-over-year by 4.6 per cent.
"We do expect some fallout from agricultural prices arising from the weather conditions recently, but we expect those to normalise by the end of the year," he told the Financial Gleaner earlier this week.
Robinson said the BOJ was still expecting for this fiscal year that inflation will be around five per cent. "Our target range is 4-6 per cent and we are still expecting it to be in the middle of that range," he added.
The central banker said that although conditions suggest that there are some increases in food prices in the short run, particularly for domestic agriculture, there were some other countervailing forces, such as the fall in petroleum prices and the slowdown or reversal in the depreciation of the Jamaican dollar against the United States currency, which they believe would help to dampen some of these increases from imported items.
"We don't have any inflation jitters and we do expect in the short run for some food prices to rise, but for the same reason that they went up they will come down, that is, supply will normalise after having been disrupted," Robinson said.
"On the inflation front we feel quite sanguine about our outlook that it will remain in the 4-6 per cent band and as of now we expect it to end the year in the middle of the band," he said.
In the past few weeks, there have been price increases on a number of baked products, including bread, which some retailers believe was attributable to the depreciation in the value of the Jamaican dollar against the United States dollar.
The Caribbean Cement Company also increased the price of Carib Cement Plus, its most popular brand, effective June 26, saying that the depreciation of the Jamaican dollar and increases in fuel prices have forced it to make the adjustment.
Robinson noted that the Jamaican dollar has been appreciating against the United States dollar steadily over the past few weeks, "partly because we supplied a lot of money during May to satisfy some extraordinary demand and with that out of the way and market inflows being normal the relatively lower demand has led to the appreciation."
"I can't say how long it will continue, but the conditions now are that there is no extraordinary demand and the daily inflows are satisfying whatever demand there is," he said.
The average selling rate of the Jamaican dollar against its United States counterpart reached its highest level of $130.48 on May 24 before appreciating steadily to $128.84 on Tuesday, June 27.