Inflation Surges to 11.3% for 12 months to March 2022

 

• For the month of March, the All-Jamaica Consumer Price Index (CPI) increased by 1.6%. March’s outturn meant that point-to-point inflation was 11.3% for the 12 months to March 2022, up from the 10.7% reported in February 2022. This puts inflation outside the BOJ’s target range of 4% to 6%, for the 8^th consecutive month. 
• For the month of March, the rise in inflation was largely driven by the 1.9% increase in the index for the ‘Food and Non-Alcoholic Beverages’ division, especially the ‘Food’ sub-group. This was impacted by higher prices for tomato, cabbage, onion and sweet pepper. 
• Also contributing to the higher inflation rate was the 3.9% upward movement in the division for ‘Housing, Water, Electricity Gas and Other Fuels’, and 0.6% increase in the ‘Transport’ division. This was caused by higher electricity rates, and fuel and lubricant prices, respectively. 
• The current breach in the inflation range is in-keeping with expectations, as the BOJ noted on February 18, 2022, that inflation was projected to successively breach the target for the next 8 to 10 months. The elevated rates will likely be driven by the continued transmission of higher 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 to 4.50% as of March 29. It is expected that it will apply an additional rate increase at its next policy decision meeting on May 29^th. This decision will likely be driven by the sustained expectations for future breaches of the target, expectations around aggressive Fed Fund rate hikes, and the still-elevated inflation expectations for the 12 months ahead, which rose to 9.1% in the December Survey from 8.9% in the prior survey.

(Source: Statin and NCBCM Research