Letter of the Day | BOJ governor’s responses are intriguing

THE EDITOR, Madam:

I am writing with reference to the recent statements published in the media from the Bank of Jamaica governor.

1.‘’It’s my job, it’s my job to bring these facts to the table for discussion ... a major mandate of the Bank of Jamaica is to control inflation within four to six per cent.’’

2. ‘’I am not against a wage increase, it’s a question of how much. Inflation has been at 6.6 per cent in the last number. A wage increase in and around that number, a little above or below is not going to hurt inflation ... a wage increase of $1.7 billion in the total economy is not going to drive inflation. However, it does have a negative demonstration effect.’’

3. ‘’I can’t foretell what is going to happen and I was not privy at all to the numbers that the Government announced in Parliament.’’ (Excerpts, BOJ Governor Richard Byles response in interview on Radio Jamaica’s Beyond the Headlines 24 August 2023)

What prompted Bank of Jamaica (BOJ) Governor Richard Byles to advise or caution the private sector against potential large increase in salaries which could drive inflation, when a similar advice or caution was not given to the Government during public sector salary negotiations? I find his response, in a Radio Jamaica interview, to the public’s reaction quite intriguing.

First, given the crucially important strategic role of the BOJ governor to control inflation and ensure stability in the economy; why was Byles reportedly treated like the general population and kept in the dark regarding the intended increase in public sector compensation?

It’s quite reasonable to argue, based on his response to radio host Dionne Jackson-Miller, that if Governor Byles was aware, by being officially privy to this crucial information he would have issued a similar caution to the Government. Noteworthy, he also declared; he can’t foretell what is going to happen.

Economists make market forecasts. Public sector negotiations dominated the media for months. There were (as always) only three possibilities regarding any increase in salaries: below, at, above or even significantly above inflation levels. Even though not officially privy to the planned numbers; from Cabinet, Governor Byles would have been well aware of these three possibilities. Additionally, even if the increased salaries granted to the public sector would not hurt inflation, this usually triggers similar demands in the private sector which potentially could.

A spark can trigger a fire and even an explosion. It’s better to prevent even the smallest fire, rather than wait to prevent people adding fuel to it. Given the aforementioned, similar situations and economic principles and his stated rationale and objective to control inflation: Why did Governor Byles hesitate to publicly caution the Government? Intriguing indeed.

DAIVE FACEY

dr.facey@gmail.com