BOJ Releases Statement on the Revised Impact of JUTC Fare Reduction on Inflation

• The Bank of Jamaica (BOJ), in a statement released on February 23, noted that upon review, it recognised that it had overestimated the impact of the reduction in JUTC fares on inflation and that it took full responsibility and apologised for the error.
• In early November 2023, the BOJ shared its concern about projected inflation with the Minister of Finance and the Public Service, Hon. Nigel Clarke, highlighting that inflation was projected to rise above the target range over an extended period, driven largely by the public passenger vehicle (PPV) fare increases announced by the Government on October 10, 2023, which would take effect in October 2023 (19%) and April 2024 (16%).
• It also shared with the Minister at that time an estimate of the cumulative impact of the increases in PPV fares as contributing approximately two percentage points to annual inflation and advised the Minister of its estimate of required reductions in JUTC fares to cushion the impact of the announced PPV fare increases.
• Subsequently, on 21 November 2023, the Minister announced in Parliament the temporary two-phase reduction in JUTC fares to support BOJ’s inflation targeting mandate. However, Governor Byles noted that the BOJ had overestimated the effect of the fare reduction, which had an offsetting impact of only 0.2%.
• Jamaica’s higher-than-targeted headline inflation of 7.4% in January 2024, which exceeded the Bank’s target of 4.0% to 6.0%, contributed to the Monetary Policy Committee’s (MPC) decision to maintain the policy interest rate at 7.0%.

• As a result of the above-noted price shocks, inflation is now projected to track above the Bank’s target range between the March 2024 and June 2025 quarters.

(Source: BOJ)