During the month of July 2018, Jamaica’s inflation rate was 1.0% relative to 0.4% in June. According to the Statistical Institute of Jamaica (STATIN), this movement was mainly at-tributable to a 3.4% increase in ‘Housing, Water, Electricity, Gas and Other Fuels’ primarily as a result of higher cost for electricity and sewage rates. The division Food and Non-Alcoholic Beverages’ showed a 0.9% increase due to higher prices for agricultural produce. As at July 2018, point-to-point inflation was 3.2% and year-to-date inflation was 0.7%. Inflation remains below the Bank of Jamaica’s forecasted range for this fiscal year of 4.0-6.0% and slightly under the 3.5%-6.5% targeted range under the stand-by arrangement with the International Monetary Fund (IMF).
We anticipate the drought conditions in prior months and higher fuel prices will push inflation higher in the short term, reversing the previous deflationary trend experienced earlier in 2018. The rise in inflation is likely to be insufficient in the short term to immediately drive local interest rates higher but instead, we may see rates stabilize. On this ba-sis, investors should seek to position their investments to protect against inflation reducing their real returns.