Inflation spikes to new high
Published:Wednesday | February 16, 2022 | 12:16 PM
Inflation returned to a new high in January, hitting 9.7 per cent as food prices climbed and floating further away from the target range set by the central bank.
With this outcome, it's likely that the Bank of Jamaica's Monetary Policy Committee will decide to raise interest rates again for a fourth time, at its next deliberations, which are due to be published on Friday, February 18.
The annual inflation rate previously climbed as high as 8.5 per cent in the latter part of last year, but fell back to 7.3 per cent as at December.
That, however, was still 1.3 percentage points above the top end of the 4-6 per cent target range that the Bank of Jamaica is mandated to defend.
It chose to do so by hiking interest rates, pushing the policy rate to 2.5 per cent after three upward adjustments since last September.
The International Monetary Fund expects Jamaica to continue growing within a four per cent band this year, but has warned that inflation remains a risk to that forecast.
Jamaican businesses, too, have been recalibrating their investment decisions on the assumption that rising inflation will erode their expected returns, notwithstanding Finance Minister Nigel Clarke's recent effort at telegraphing calm on the price movements and confidence that they would soon ameliorate.
Inflation is estimated as a change in the consumer price index from one period to the next.
The index maps the price changes in a discrete set of consumer products and services purchased by private households, referred to as the CPI basket or inflation basket.
Statin reported on Wednesday that the main driver of consumer prices in the month of January, when inflation was estimated at 0.6 per cent, was the rising cost of restaurant and other hospitality services, which increased by more than eight per cent.
But the cost of other food and drink products barely moved, tempered by a 3.5 per cent decline in prices for vegetables and other farm crops.
The cost of electricity also declined during the month, due to lower rates.
For the annual period ending January, the 9.7 per cent increase in consumer prices was driven by the cost of food and beverages, up 10 per cent; transport, 14 per cent; and utilities and gas, up 11 per cent. The prices of food and non-alcoholic beverages have the most influence on the inflation rate.