Inflation Surges to 10.7% for 12 months to February 2022

• For February, the All-Jamaica Consumer Price Index (CPI) increased by 0.8% up from 0.6% in January and in line with the 0.8% outturn in December 2021. February’s outturn meant that point-to-point inflation was 10.7% in the 12 months to February 2022, up from the 9.7% reported in January 2022. February’s outturn puts inflation firmly outside the BOJ’s target range of 4% to 6%, for the 7^th consecutive month. 
• A 1.3% increase in the index for the ‘Food and Non-Alcoholic Beverages’ division was the main driver of the rise in consumer prices. The prices for Meat and other parts of slaughtered land animals increased due to the rise in the prices for chicken products. Also contributing to the upward movement in the division was the 1.0% increase in the index for the class ‘Vegetables, tubers, plantains, cooking bananas and pulses’, as prices increased for some vegetables.  
• The elevated inflation rate will continue to be driven by the transmission of higher international commodity and shipping prices to domestic processed food, food-related services and energy and fuel prices, as well as a recovery in domestic demand. The geopolitical tensions between Russia and Ukraine in March have adversely affected oil, gas, and grain prices, which poses a risk to both global and domestic growth and will likely fuel further price increases in March. Moreover, a renewed spike in COVID-19 cases in China is likely to further exacerbate supply chain woes.  
• The BOJ has already increased its policy rate to 4.00% and may increase it further at its next policy decision meeting scheduled for March 29^th. Apart from the higher inflation rates, this decision is likely to also be driven by the higher inflation expectations. Inflation expectations for 12 months ahead rose to 9.1% in the December Survey from 8.9% in the prior survey.

(Source: STATIN and NCBCM Research)