Jamaica’s Annual Point-to-Point Inflation Reaches 3-Year Low

  • Consumer prices fell to a 3-year low in October, according to data from STATIN. The point-to-point inflation rate for October 2023 and October 2024 was 4.9%, the lowest since June 2021, when the reopening of economies caused a spike in global demand and supply chain challenges that led to a surge in prices for imported goods.
  • October’s low inflation outturn primarily reflects lower prices in the ‘Housing, Water, Electricity, Gas and Other Fuels’ division (+3.5%), which was partially offset by higher costs for the ‘Food and Non-Alcoholic Beverages’ (+5.3%) and ‘Transport’ (+9.1%) divisions.
  • Growth in the ‘Housing, Water, Electricity, Gas and Other Fuels’ division was due mainly to increases in the prices of ‘Imputed Rentals for Housing’ (+6.2%) and ‘Water Supply and Miscellaneous Services Relating to the Dwelling’ (+7.8%) spurred by higher rental prices and water and sewage rates.
  • The ‘Food and Non-Alcoholic Beverages’ division continued to be impacted by higher prices in the ‘Fruits and Nuts’ (+17.5%) and ‘Vegetables, tubers, plantains, cooking bananas and pulses’ (+5.7%), due to the lingering effects of Hurricane Beryl and the recent heavy rains on the supply of some produce.
  • Higher prices in the Transport division were driven by a 15.4% increase in the ‘Passenger Transport Services’ class, resulting from a 19% rise in taxi fares in October 2023, and the fare restructuring by the Jamaica Urban Transit Company effected May 2024.
  • At 4.9%, Jamaica’s inflation is comfortably within the BOJ’s target range of 4.0%-6.0%. With the path for inflation over the next eight quarters likely to be lower, it could set the stage for another rate cut at the next meeting of the Monetary Policy Committee on November 21. Currently, the policy rate stands at 6.50% after 2 consecutive 25 basis points cuts, which is significantly higher than the 0.5% rate in June 2021.
  • Still, the US Federal Reserve’s (US Fed’s) interest rate pathway may be a constraint on the magnitude of future BOJ rate cuts, as Jamaica’s central bank walks the interest rate differential tightrope to help moderate inflation. Projections for the US Fed's 2025 rate cut trajectory have moderated due to the potential impacts of a Trump presidency. Proposed policies such as corporate tax cuts, deregulation, broad tariffs, and mass deportations could stimulate US inflation. This, in turn, could drive up Jamaica's imported inflation, complicating the Bank of Jamaica's (BOJ) short-term policy rate projections.

(Source: STATIN)