Annual inflation back above 10%, but JMEA head not worried
New data released by the Statistical Institute of Jamaica, Statin, on Thursday shows that annual inflation is back above 10 per cent, and is one point above where it stood at the end of summer.
Monthly inflation in November was estimated at just 0.4 per cent, while annual inflation rose to 10.3 per cent, up from 9.9 per cent in October and 9.3 per cent in September.
The main areas contributing to the rise in prices were food and non-alcoholic beverages, up 14.3 per cent; restaurant and accommodation services, up 20.2 per cent; and housing, water, electricity, gas and other fuels, up seven per cent.
Within the food driver, the main driver of inflation was the ‘vegetables, tubers, plantains, cooking bananas and pulses’ grouping, in which prices roses 6.5 per cent.
“This was due to higher prices for agricultural produce such as sweet potato, tomato, cabbage and sweet pepper,” Statin said.
Notwithstanding the upward climb in consumer prices, the Jamaica Manufacturers and Exporters Association is taking the monthly track of inflation as a hopeful sign.
The 0.4-per cent rate in November is a substantial deceleration from the 1.4-per cent rate in September and 1.5-per cent in October.
JMEA President John Mahfood is hoping that it will serve to slow the aggressive interest rate hikes from the Bank of Jamaica.
“That is important because that inflation has come down significantly from the previous month. Annualised, 0.4 per cent is 4.8 per cent which is less than the central bank’s target range of 4 to 6 per cent. It’s not so much that the point-to-point inflation has gone up to double digits, the focus is more on the rate for November coming down dramatically over the month of September,” Mahfood said in an interview with the Financial Gleaner.
“I take this as very good news for the country as we approach the end of the year,” he said.
In order to slow inflation and nudge it back towards its target range, the Bank of Jamaica has been focused on cooling down prices through mostly half-point interest rate hikes.
Its policy rate was last increased from 6.5 per cent to 7.0 per cent in November and a new rate decision is scheduled for Tuesday, December 20.
The bank’s stance, however, has made borrowing more expensive for businesses and consumers.
It’s unclear what signal the Bank of Jamaica might take from the actions of large economies with with Jamaica does business. Last week, for example, the US Federal Reserve, on which BOJ keeps a keen watch, continued to increase rates, but dialled back the size of the increase from three-quarter point to half-point.
Central banks in the United Kingdom and the European Union fuelled suit.
But amid the slowdown, they all signalled that their rate hike policies would continue.
Still, the JMEA is hoping that BOJ will hold its policy rate steady on Tuesday.
“My expectation is that the central bank would use this and hopefully not increase interest rates again this month, because it is now showing that Jamaica’s inflation is now moderating,” Mahfood said in reference to the November inflation data.
“That follows too the lower inflation rate in the US, along with the lowering of oil prices worldwide, which is now down to US$70 per barrel,” he said.