Financial Analysts: Increase in Inflation Won’t Stop Interest Rate Slash

At least two financial analysts believe the increase in the country’s point-to-point inflation rate in August will not stand in the way of an expected move by the Bank of Jamaica, BOJ to cut interest rates.

The Statistical Institute of Jamaica, STATIN, is reporting that the country’s point to point inflation rate climbed to 6.5 per cent for the month of August.

This is up from 5.1 per cent at the end of July.

Daina Davy reports.

The point-to-point inflation rate for the month of August means it’s again outside the BOJ mandated target range of four to six per cent.

It ends a five-month trend where inflation remained within range. The jump in inflation was driven primarily by the impact of Hurricane Beryl on food prices and electricity costs.

For this reason, financial analyst, Dennis Chung, believes the rise in inflation will be temporary.

Chung doesn’t believe that the movement of inflation outside the BOJ’s target range will hinder the Central Bank in its bid to lower interest rates this year.

The current interest rate is 6.75 per cent per annum, following on the decision by the BOJ to reduce the mark by 25-basis points in August.

In recent weeks the bank has hinted strongly that a rate cut is likely.

Development economist, Dr. Christian Stokes says he too believes the BOJ will continue its trend of bringing down the interest rate.

Meanwhile, chairman of the Economic Programme Oversight Committee, EPOC, Keith Duncan says he expects a rate cut by the BOJ at the next policy meeting of the Central Bank on September 20.

Keith Duncan, chairman of EPOC, speaking on Nationwide This Morning on Tuesday.