Jamaicans have been warned to brace themselves for increased prices as inflation threatens to breach the upper limit of the Bank of Jamaica’s (BOJ) target range over the next 10 to 12 months.
“This inflation forecast assumes the continued lagged impact of international commodity and shipping prices. Of note, some further pressures from energy prices are expected in the coming months. Agricultural food prices are also expected to support inflation,” said BOJ Governor Richard Byles.
On Monday, he told a news conference that inflation could peak in the range of nine to 11 percent but remains hopeful that further tightening of monetary policy will influence a return of inflation to the target range in the latter part of 2022.
Byles told reporters there were signs of an improving economy, referring to the success so far against the latest wave of the coronavirus (COVID-19) pandemic. He also noted renewed economic activity, higher employment numbers as well as buoyant inflows to the foreign exchange market, and firm international reserves at US$4.3 billion at February 16.
The Central Bank Governor noted the Statistical Institute of Jamaica’s (STATIN) report of economic activity has expanded by 5.8 percent for the September 2021 quarter on top of a 14.2 percent growth in the June 2021 quarter.
He said as of February 16, the exchange rate was J$157.42 to US$1, representing an annual point-to-point depreciation of four percent, a slower pace of depreciation than occurred over a similar period of last year.
Byles said since the beginning of this year, the exchange rate has depreciated by 1.5 percent, significantly slower than the 6.1 percent depreciation recorded for a similar period in 2021.
He attributes this depreciation deceleration to inflation targeting actions taken by the BOJ, specifically the selling of US$301.9 million into the market by the Central Bank since the start of the year.
Meanwhile, the BOJ said it is still on track to roll out its digital currency (CBDC) during the first quarter of 2022.
Deputy Governor with responsibility for Banking, Currency Operations, and Financial Markets, Natalie Haynes, said several vital outputs are being targeted for the period. These include the passage of the amendment to the Bank of Jamaica Act to make CBDC legal tender and the entity the sole issuer and increase the number of deposit-taking institutions (DTIs).
She told reporters that the National Commercial Bank (NCB) remains the sole CBDC wallet provider, and has already onboarded approximately 300 small merchants, including barbers, hairdressers, vendors, and cook-shop operators.
She said the BOJ is testing the system with another DTI that acquired the hardware from Republic of Ireland-based technology provider, eCurrency Mint Incorporated, selected to support CBDC project implementation.
“So, hopefully, by the end of this quarter, that DTI will be ready to onboard customers. [But] we need more DTIs to come in so that CBDC can be more widely available to customers,” she pointed out.
CBDC is a digital form of central bank-issued currency and is, therefore, legal tender. It is a fiat currency, which means it can be exchanged, dollar for dollar, with actual cash, and is issued to licensed DTIs wholesale.
The BOJ said the benefits to be derived by citizens, businesses, and the Government from the adoption and introduction of a viable digital currency solution include increased financial inclusion and providing another means of efficient and secured payments.