Thu | Feb 21, 2019

JA misses inflation target...again -- PNP

Published:Saturday | January 19, 2019 | 2:27 PM

The Opposition Peoples National Party (PNP) says for the second time this fiscal year Jamaica has missed the Bank of Jamaica’s (BOJ) inflation target.

The party says this has again triggered the requirement for Jamaica to consult with the local team of the International Monetary Fund on the deviation from the inflation target in the agreement between them.

The PNP, citing a statement released by the BOJ earlier this week, says the annual inflation rate at the end of December last year fell to 2.4 per cent.

This, it noted, was short of the BOJ’s target of between four and six per cent.

The PNP underscored that the statement released by the central bank on Wednesday 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.”

In addition, it said the BOJ statement also made the “telling point” that “a lower inflation rate may be associated with weakness in the economy.”

The party says the failure to reach the projected inflation target comes amid reports over the past two weeks of a severe shortage of foreign exchange in the local market.

The PNP says this was “confirmed” yesterday when the BOJ intervened by offering US$20,000,000 for sale through 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 PNP said in a statement. 

“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,” it added.

The PNP noted that ”these sudden and erratic” movements in the exchange rate create a more challenging environment for businesses and urged the government to tell the country why the foreign exchange market has been experiencing a major supply shortfall in the height of the tourist season.

The party also called on the central bank to assure the country that the overhang of demand from the “flash auction” will not be allowed to further disrupt the local foreign exchange market.

In addition, it says the BOJ should 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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