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JAMAICA | JA again misses Inflation Target - PNP Concerned

Featured Opposition Spokesman on Finance and Planning Mark Golding. Opposition Spokesman on Finance and Planning Mark Golding.
KINGSTON, January 20, 2019 - The Opposition Peoples National Party is concerned that Jamaica has missed the BOJ’s inflation target for the second time this fiscal year, again triggering the requirement to consult with IMF staff on the deviation from the programme’s inflation target.

BOJ has reported that the annual inflation rate at December 2018 fell to 2.4 per cent, breaching the BOJ’s target of 4.0 per cent to 6.0 per cent.

The BOJ’s release of January 16, 2019 reiterated that – “An inflation rate of between 4.0 per cent and 6.0 per cent is judged to be appropriate for Jamaica at this time to ensure a range of desired economic outcomes”. It also made the telling point that “a lower inflation rate may be associated with weakness in the economy.”

This comes after reports over the past two weeks of a severe shortage of foreign exchange in the local foreign exchange market, which were confirmed yesterday when the BOJ intervened by offering US$20,000,000 for sale via a “flash” auction.

The published report on the auction states that BOJ received 44 eligible bids seeking to buy a total of US$50,100,000, which has left 27 bids (and US$30,100,000) unsatisfied.

The weighted average rate of the accepted bids was J$133.23 to US$1.00. Just two week ago, the rate was J$128.50 to US S1.00.

The Opposition recalls that Jamaica experienced a period of similar rapid currency devaluation back in June/July 2018, which also coincided with the announcement that the annual inflation rate had breached the BOJ’s target.

The Opposition notes that these sudden and erratic exchange rate movements create a more challenging environment for businesses, and is calling on the Government to explain why the foreign exchange market has been experiencing a major supply shortfall in the height of the tourist season.

The Opposition also calls on the BOJ to assure the country that the overhang of demand reflected in the result of last week's “flash auction” will not be permitted to further disrupt the foreign exchange market, and to explain whether this kind of repeating exchange rate volatility is what Jamaica can expect from the new policy of “inflation targeting”.

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  • Countries: Jamaica