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Inflation rate falls but BOJ cautious

Published: Wednesday August 21, 2013 | 6:23 pm Comments 0

The Bank of Jamaica (BOJ) says it is encouraged by inflation data for the June quarter which recorded lower than projected price increases for goods and services.

The Central Bank says inflation for the period April to June was 1.2 per cent, below the projected 2-3 per cent rise for the quarter.

The current inflation rate is also below the 2.7 per cent recorded for the previous January to March quarter.

BOJ Governor Brian Wynter says the lower than projected inflation rate resulted from factors including a sharp reduction in energy costs and weakened anticipated demand conditions.

However, the BOJ is forecasting an increase for the upcoming September quarter at between 2-3 per cent.

Wynter says if this materialises, the inflation rate will be the lowest in five years.

The BOJ is also maintaining its 8.5 per cent-10.5 per cent inflation projection for the 2013-2014 fiscal year.

Wynter says a cautious assessment of near term risks suggests that inflation may increase at the higher end of projections.

He says the risks largely relate to administrative adjustments to this week’s announcement of fare increases and possible adjustments to utility costs coupled with higher than expected crude oil prices.

According to Wynter, the BOJ's objective is to achieve gradual reduction in inflation consistent with Jamaica's trading partners.

He says low inflation and exchange rates are valuable tools in maintaining the competitiveness of the export sector and subsequently sustained economic growth.

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