Inflation Recorded Above Target at 6.1% for August 2021

  • The All-Jamaica Consumer Price Index (CPI) rose by 0.9% for August 2021 contributing to the 12-mth point-to-point inflation rate of 6.1%, which is an increase from the 5.3% reported in July 2021, marginally above the target range. 
  • A 1.8% increase in the heavily weighted index for the “Food and Non-Alcoholic Beverages” division as well as increases in the index for the divisions ‘Housing, Water, Electricity, Gas and Other Fuels’ (0.3%), ‘Transport’ (0.4%) and ‘Recreation, Sport and Culture’ (0.6%) contributed to the overall inflation rate. 
  • Higher prices for textbooks and stationery materials was the main contributor to the increase in the index for the division ‘Recreation, Sport and Culture’, while higher fuel prices contributed to the rise in the index for the ‘Transport’ division. Additionally, greater electricity rates influenced the increase in the index for ‘Housing, Water, Electricity, Gas and Other Fuels’ division. However, this was tempered by a decline in the index for the group ‘Water Supply and Miscellaneous Services Relating to the Dwelling’. 
  • Elevated inflation rate is a common theme globally as countries contend with persistent supply chain challenges and rising demand from the ongoing economic recovery. 
  • According to Bank of Jamaica, inflation is projected to average between 5.5% and 6.5% over the next two years, which is higher when compared to an average inflation rate of 5.0% over the past two years, and above the previous projection of 4.8%. The inflation forecast for the next two years anticipates a gradual rise in core inflation, supported by the lagged impact of higher international commodity and shipping prices, a recovery in domestic demand and a temporary increase in inflation expectations. 
  • Owing to the elevated inflation level, the BOJ is considering contractionary monetary actions, specifically an increase in its policy rate to partially reduce the impact of borrowing and consumption on prices. Conditional on the gradual tightening of monetary conditions, inflation is projected to remain at 5.0% over the medium term.

(Source: STATIN and BOJ)