Central Bank hints more price increases, stronger policy measures coming
Published:Monday | February 21, 2022 | 10:34 PM
Central Bank Governor Richard Byles has warned that more price increases are on the horizon, but so too are stronger policy measures – a hint that additional rate rises are also coming.
According to Byles, without further, stronger policy actions, inflation will continue to breach the upper limit of the bank's target range over the next 10 to 12 months and will peak in the range of 9 to 11 per cent.
"This inflation forecast assumes the continued lagged impact of international commodity and shipping prices. Of note some further pressures from energy prices are expected in the coming months. Agricultural food prices are also expected to support inflation,” the Byles said Monday at a Bank of Jamaica (BoJ) press conference.
He is hopeful that further tightening of monetary policy will influence a return of inflation to the target range in the latter part of 2022.
Meanwhile, the central bank governor continues to point out green shoots in the economy that give hope of a sustained recovery, including the apparent receding of the fourth wave of the COVID-19 pandemic, renewed economic activity, higher employment numbers, buoyant inflows to the foreign exchange market and strong international reserves at US$4.3 billion at February 16.
He pointed to STATIN's report of economic activity having expanded by 5.8 per cent for the September 2021 quarter on top of a 14.2 per cent growth in the June 2021 quarter.
There are also positive developments in the foreign exchange market, according to the central bank.
The BOJ governor noted that as at February 16, the exchange rate was J$157.42 to US$1, representing an annual point-to-point depreciation of 4.0 per cent.
This, he highlighted, was a slower pace of depreciation than occurred over the similar period of last year.
He said that since the beginning of 2022, the exchange rate has depreciated by 1.5 per cent, significantly slower than the 6.1 per cent depreciation that was recorded for the similar period in 2021.
This deceleration in the pace of depreciation is being attributed to inflation targeting actions taken by the BoJ, specifically the selling of some US$301.9 million into the market by the central bank since the start of the year.
This significantly eclipses the US$88.7 million sold to the market in the same period of 2021.
In addition, the BoJ said it sold US$115.3 million directly to the energy sector.
For 2022, up to February 3, authorised dealers and cambios averaged daily hard currency purchases of approximately US$37.2 million, 12 per cent higher than the average of US$33.3 million recorded over the same period last year, according to the BoJ.
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