Inflation Surges to 9.7% for 12-months ended January 2022

  • For the month of January, the All-Jamaica Consumer Price Index (CPI) increased by 0.6%. January’s outturn meant that point-to-point inflation was 9.7% in the 12 months to January 2022, up from the 7.3% reported in December 2021. This puts inflation outside the BOJ’s target range of 4% to 6%, for the 6th consecutive month. 
  • For the month of January, the rise in inflation was largely driven by the 8.4% increase in the index for the ‘Restaurants and Accommodation Services’ division as tourism activity increased relative to the prior period. The inflation rate was also impacted by a 0.6% increase in the ‘Transport’ division which resulted from increased petrol prices. However, the rise in the point to point inflation rate was influenced by increased prices in the: Food and Non-Alcoholic Beverages (9.9%), Transport’ (13.8%) and Housing, Water, Electricity, Gas and Other Fuels (10.9%), divisions. 
  • The current breach in the inflation range is in-keeping with expectations, as the BOJ noted on December 20, 2021, that inflation was projected to successively breach the target for the next 8 to 10 months. The elevated rates will likely be driven by continued transmission of high international commodity and shipping prices to domestic processed food, food-related services and energy price inflation, as well as a recovery in domestic demand. 
  • The BOJ has already increased its policy rate by 200 basis points to 2.5% per annum, and it is anticipated that it will increase the rate further at its next policy decision meeting on February 18th. This decision will be driven by the sustained expectation for future breaches of the inflation range. It will also be influenced by high inflation expectations for the 12 months ahead, which rose to 8.9% in the November Survey from 8.2% in the prior survey. Fitch Solutions currently forecasts another 25bps increase in the rate in 2022, but we expect the total rate hike for this year to surpass this amount.

(Source: Statin and NCBCM Research)