The Bank of Jamaica (BOJ) announced that the Minister of Finance, The Honourable Minister Audley Shaw, approved a continuous medium term inflation target for the Bank in September 2017. This approval substitutes the annul fiscal year target. The target approved by the Minister is 4% – 6% for the Bank.
The target inflation designates the Bank to periodically adjust the levers of monetary policy, mainly the policy rate, to guarantee that the target is met. The Bank noted in its press release, “operating with a target automatically makes monetary policy more predictable, transparent and justifiable.” “The target was selected on the basis of the country’s current and prospective economic circumstances. The country has experienced subdued inflation while, in the “context of recent fiscal and structural reform.” Given this, the Bank believes the economy is poised to enter a phase of higher GDP growth.
“The establishment of a medium-term target allows the public to hold the Bank to account for the outcomes from implementing a forward-looking monetary policy strategy, given the known lags in the monetary transmission mechanism.”
The medium-term inflation target is also closely coordinated with the forecasted outcomes of fiscal policy set out in the Government’s Fiscal Policy Paper. The target is also subject to reviews by the Minister of Finance and will be adjusted if economic conditions warrant. The target is continuous over the medium term instead of only for the fiscal year, this allows the Bank to evaluate Jamaica’s inflation rate at any time, not just at the end of a fiscal or calendar year.