Impact of drought could push up inflation in coming months, says Braithwaite

By Kimone Witter    

 

Lecturer in the Department of Economics at the University of the West Indies, Mona, Dr. Samuel Braithwaite is anticipating an upward movement in the inflation rate over the next few months, as a result of the impact of the drought on the cost of goods and services.

 

Dr. Braithwaite made the observation as he urged a tempering of optimism about the annual inflation rate of 5.6 per cent for March 2023 to March 2024.

 

This was 0.6 percentage points lower than the 6.2 per cent point-to-point inflation rate as at February 2024.

 

The Statistical Institute of Jamaica said the main contributor to the inflation outturn was the lower rate of increase for the heaviest weighted division, 'Food and Non-Alcoholic Beverages'.

 

Speaking Wednesday on the Morning Agenda on Power 106, Mr. Braithwaite said the next few months will indicate how well the country weathered the dry spell. 

 

"When you think of agricultural output...it will take a few months - I don't know, three, four months - before we see the impact of drought-like conditions or not drought-like, but drought conditions. So it is a good thing that the inflation number is within target, but what is more important in my mind is looking forward to the next few months," he said. 

 

On Tuesday, the Bank of Jamaica, in welcoming the reduction in headline inflation, said the Monetary Policy Committee will continue to closely watch the inflation numbers and other incoming data over the ensuing months.

 

The committee will assess the extent to which the current level of inflation will be sustained, before making a  determination on whether to change the Bank's monetary policy stance. 

 

 

In the meantime, businessman John Mahfood said a low inflation rate will give companies stability in their operations.

 

"It's really good for businesses when the inflation rate is predictable and low. You don't have to be constantly worried about how you price your goods. You don't have to be worried that the input costs that you're incurring is going to be increasing because inflation tends to erode the profitability of companies."

 

Mr. Mahfood said it will also increase the spending power of consumers since "a low inflation means that hopefully the salary increases will tend to equal the inflation rate or exceed it".

 

The businessman was also a guest on the Morning Agenda.