Bank of Jamaica’s medium-term inflation target set at 4 to 6%
Minister of Finance and the Public Service Audley Shaw has approved a continuous medium-term inflation target of 4.0 to 6.0 per cent for the Bank of Jamaica (BOJ).
That has replaced the annual fiscal year inflation target.
The target will be subject to annual reviews by the Minister, at which time it may be adjusted if economic conditions warrant, the central bank said in a release.
The target is continuous over the medium term instead of only for the fiscal year because this allows the Bank to be evaluated on Jamaica’s inflation rate at any time, not just at the end of a fiscal or calendar year, it said.
The use of a target for inflation, in contrast to an inflation forecast, means that the central bank periodically adjusts the levers of monetary policy, most often the policy rate, to ensure that the target is achieved.
In keeping with international best-practice for leading central banks in developing and developed economies, operating with a target automatically makes monetary policy more predictable, transparent and justifiable, the BOJ said.
BOJ said the medium-term inflation target was selected on the basis of Jamaica’s current and prospective economic circumstances.
It noted that Jamaica has already reduced inflation to relatively low levels while, in the context of recent fiscal and structural reforms, the economy is poised to enter a phase of higher gross domestic product growth.
The establishment of a medium-term target allows the public to hold the Bank to account for the outcomes from implementing a forward-looking monetary policy strategy, given the known lags in the monetary transmission mechanism, the BOJ said.
The medium-term inflation target is also more clearly harmonised with the projected outcomes of fiscal policy set out in the government’s Fiscal Policy Paper.