Editor’s note – the following is the major part of the latest Quarterly Monetary Policy Report issued by the Bank of Jamaica on Friday (August 30, 2019).
Bank of Jamaica’s projections indicate that inflation will fall below the lower limit of the 4.0 per cent to 6.0 per cent target at various points over the period August 2019 to June 2020. This forecast assumes that core inflation will remain generally low in the range 2.0 per cent to 3.0 per cent over the forecast horizon. The projected trajectory for inflation incorporates, among other things, a strong increase in domestic agricultural prices in the September quarter before supplies improve in the latter part of the December 2019 quarter and (2) lowers energy prices, which are expected to keep inflation constrained.
Global economic growth for the June 2019 quarter is estimated to have decelerated relative to the March 2019 quarter. Global growth projections for the next eight quarters have been revised downward by 0.2 percentage points to average 3.2 per cent, and is projected to average 3.1 per cent over the medium term. In the context of mounting global economic uncertainties and muted inflation pressures, the US Federal Reserve reduced interest rates in July 2019. BOJ projects that there will be further declines in the Fed Funds rate over the next eight quarters, which will support a downward drift in market interest rates, including Jamaica’s sovereign bond yields. The spreads on GOJ sovereign bonds are expected to remain relatively stable over the next eight quarters. Jamaica’s terms of trade (TOT) Index for the next eight quarters is projected to fall at a slower pace relative to the previous projection. This revision mainly reflects the impact of lower crude oil prices.