Inflation Cools; Falls Within BOJ’s Target Range for September

  • There was a 0.5% increase in the All-Jamaica Consumer Price Index (CPI) for September 2023 resulting in the index moving from 132.2 to 132.9 in September. The main contributor to this movement was an 11.8% rise in the index of the ‘Education’ division, due to higher tuition fees for private schools at the primary level. The inflation rate was also impacted by the 0.7% rise in the ‘Transport’ division mainly as a result of higher petrol prices.
  • The index for the heavily weighted ‘Food and Non-Alcoholic Beverages’ division went up by 0.1% influenced by increases in the index for most classes within the division. However, there was a 1.9% decline in the index ‘Vegetables, tubers, plantains, cooking bananas and pulses’ class and this tempered the overall increase of the division. This was due mainly to lower prices for agricultural produce especially yellow yam and tomato, due to increased rainfall. For the group ‘Non-Alcoholic Beverages’, the index for the classes ‘Fruit and vegetable juices’ and ‘Coffee, Tea, Cocoa’ each increased by 0.7%, while ‘Water, Soft drinks, and Other non-alcoholic beverages’ went up by 0.4%.
  • As of September 2023, the point-to-point inflation rate was 5.9%. This was 0.9 percentage points lower than the inflation rate for the prior point-to-point period due to lower prices for some agricultural products, as a result of favourable weather conditions. The chief contributors to the 5.9% inflation rate were the divisions: ‘Food and Non-Alcoholic Beverages', up by 9.8% and ‘Restaurants and Accommodation Services’ up by 12.0%. These increases were, however, moderated by the 1.9% fall in the index of the ‘Housing, Water, Electricity, Gas and Other Fuels’ division.
  • On September 28, 2023, the BOJ had its monetary policy meeting, where it deemed it appropriate to maintain the policy rate at 7.00% and watch the pass-through effects on deposit and loan rates. Point-to-point inflation was projected to fall and enter the BOJ’s target range of 4.0% to 6.0% by the December quarter, which was achieved in September for the second time this year; the rate entered the range briefly in April. However, there is a risk of an uptick in inflation in October given the recent fare increase and rising oil prices due to the Israel-Hamas conflict. The BOJ forecasts that inflation will generally remain within its range, except for some months in 2024. The next policy decision will be on the 21st of November, where it is expected that BOJ will maintain its policy rate at 7.00%.

(Source: STATIN)