Inflation Holds Steady at 4.7 per cent in January— But External Risks Loom for Jamaica
FOR the first time in four months, Jamaica’s consumer prices fell in January, providing a welcome reprieve for households grappling with rising costs. The Consumer Price Index (CPI) dipped by 0.3 per cent compared to December 2024, according to data from the Statistical Institute of Jamaica (Statin). This marks the first monthly decline since September 2024.
The drop was largely driven by a sharp 7.4 per cent decrease in vegetable prices, as improved agricultural output brought down costs for staples like tomatoes, carrots, and yams. Lower electricity rates in the month also contributed, leading to a 0.3 per cent decline in housing-related expenses. However, water and sewage rates increased by 1.2 per cent, partially offsetting the gains in this category.
But not all costs are easing. Dining out became more expensive, with restaurant prices rising by 2.2 per cent, while private school tuition fees pushed education costs up by 1.8 per cent. These increases tempered the overall decline in January.
Inflation Stays Steady
On an annual basis, inflation held steady at 4.7 per cent in January, well within the Bank of Jamaica’s (BOJ) target range of 4-6 per cent for the fifth consecutive month. Over the past year, inflation has breached this range only three times — a sign of relative stability despite fluctuations in specific categories.
This steady inflation rate signals continued price stability in Jamaica’s economy and reflects the effectiveness of the BOJ’s monetary policy stance. According to minutes from the BOJ’s Monetary Policy Committee (MPC) meeting in December 2024, inflation was expected to remain within the target range over the near term, supported by waning demand pressures, stable exchange rates, and declining inflation expectations.
The BOJ has progressively reduced its policy interest rate to support economic growth while keeping inflation anchored. The most recent cut brought the rate down to 6 per cent in December 2024. The January inflation figures align with these projections and suggest that monetary easing has not destabilised price levels.
However, external developments could complicate this outlook. The MPC minutes projected that US inflation would continue to decelerate toward the Federal Reserve’s target of 2 per cent as demand slowed and labour market conditions eased. In contrast, recent US inflation data for January 2025 showed a year-over-year increase of 3 per cent — higher than expected — driven by persistent price pressures in energy and transportation costs.
Global Implications for Jamaica
The higher-than-expected US inflation could have ripple effects on Jamaica’s economy and monetary policy decisions. A stronger US dollar resulting from tighter Federal Reserve policy could increase imported inflation for Jamaica, particularly for energy and food commodities priced in US dollars. Additionally, tighter global financial conditions could lead to capital outflows from emerging markets like Jamaica as investors seek higher yields in US-based assets.
The BOJ’s December MPC minutes had already highlighted upside risks to Jamaica’s inflation outlook stemming from potential changes in US economic policies and global commodity price volatility. The January US inflation data underscores these risks and suggests that external factors may play a significant role in shaping Jamaica’s monetary policy decisions moving forward.
Looking Ahead
The data released Monday comes just ahead of the Bank of Jamaica’s Monetary Policy Committee meeting this week, at which policymakers will assess whether further action is needed to keep inflation in check while supporting economic growth. So far, the BOJ has cut its policy rate four times between August and December 2024 — each time by a quarter percentage point — bringing it from 7 per cent to 6 per cent.
Policymakers are likely to weigh domestic trends alongside external risks as they chart their next steps. With U S. inflation showing signs of persistence and global financial markets facing uncertainty, the BOJ may need to tread cautiously on further monetary easing while maintaining its focus on exchange rate stability and price control.
