BOJ: Inflation could fall in second half of the year | Loop Jamaica

The content originally appeared on: Jamaica News | Loop News

The Bank of Jamaica (BOJ) has forecasted that inflation could fall in the second half of the year, in line with a projected fall in commodity prices.

This means that the public should start to see lower inflation rates each month, beginning in the second half of 2022, as long as tensions between Russia and Ukraine do not escalate and inflation among Jamaica’s trading partners falls.

Until then, Jamaicans should brace for a further rise in inflation over the next two months.

Inflation at April 2022 of 11.8 per cent was higher than the outturn at March 2022 and represented the ninth consecutive month that inflation has been above the central bank’s target range of four and six per cent.

To this end, the BOJ has increased the policy interest rate by 50 basis points to five per cent per annum effective Friday, May 20.

The BOJ said its decisions aim to continue limiting the pass-through of the ongoing and protracted commodity price shock to inflation and facilitate a return of inflation to the target range over the shortest possible time.

Its decisions reflect a cumulative increase in the policy rate of 450 basis points since October 2021.

According to the central bank, its Monetary Policy Committee (MPC) decision to further tighten monetary policy was being made in a period of high uncertainty.

The measures are expected to cause interest rates on deposits and loans to rise further. They are also likely to cause demand in the economy to fall and, consequently, limit the ability of businesses to pass on price increases to consumers.

In the meantime, the BOJ will continue other measures to contain Jamaican dollar liquidity expansion and maintain stability in the foreign exchange market.

Since October 2021, the BOJ sold approximately US$552 million to the foreign exchange market, more than twice the amount sold for the corresponding period last year.

In addition, the BOJ adjusted the Net Open Position limits for deposit-taking institutions (DTIs).

These policy actions also contributed to the maintenance of stability in the foreign exchange market and led DTIs to commence adjusting interest rates on deposits and loans, the bank said.

The BOJ’s next policy decision announcement is June 29, 2022.