CONSUMER prices cooled in September as lower prices for petrol and electricity brought welcome relief to household budgets in the month. The decline in those prices was more than enough to outweigh higher prices for some foodstuff and increases in tuition fees.

During September alone inflation was measured at -0.2 per cent, the first time since April that prices in a single month actually went down overall instead of up. It was enough to pull the more-eagerly-watched, 12-month, point-to-point inflation rate — which measures how prices moved from September last year to September this year — down to 5.7 per cent and back within the target range of the four to six per cent the central bank is mandated to maintain price increases.

Bank of Jamaica’s recent decision to cut its policy rate by 25 basis points to 6.5 per cent on September 30 is a promising move, especially considering the country’s economic uncertainty. With headline inflation falling from 6.5 in August to 5.7 per cent in September, rate reduction brings hope for economic stimulation. Bank of Jamaica also hinted at revising its inflation forecast downward, thanks to core inflation dropping to 4.3 per cent — a testament to the decreasing underlying inflation trend since the beginning of 2024.

This decision could be a strategic effort to mitigate the risk of recession, which some forecasts predict may occur in the next few quarters. By lowering interest rates the central bank aims to boost borrowing, spending, and overall economic activity.

Yet, the central bank was careful not to send signals that its policy rate would be coming down as fast as it went up.

“The glide path for future interest rate adjustments will be gradual,” it said in notes accompanying its rate decision two weeks ago.

Still, it said the path for inflation over the next two years shows promising signs that it will be lower than expected earlier this year.

“This outlook largely reflects the possibility of a lower-than-anticipated impact of Hurricane Beryl on agricultural supplies. Additionally, some key drivers of headline inflation continued to moderate in the context of falling international commodity prices. The lagged effect of the bank’s monetary policy posture over the past three years should also continue to dampen domestic demand and wage pressures. The net flow of new domestic currency loans to the private sector for July 2024 also continued to moderate. Inflation expectations in Jamaica have been on a consistent downward path and the exchange rate has been relatively stable. In this regard, inflation is expected to settle within the Bank’s target range over the forecast horizon, with the exception of the next two to three months. There is, however, an ongoing upside risk to the inflation projection in the context of the current active hurricane season,” the bank said.