The Bank of Jamaica, BOJ, is reporting that the country missed its inflation target in December.

According to the BOJ, inflation in December was too low.

The Central Bank will now have to submit a report to the Minister of Finance within 60-days on why the target was missed and any proposed remedial actions, if deemed necessary.

The missed target also triggers another consultation with the International Monetary Fund (IMF). The Consumer Price Index for December shows that inflation fell by one per cent. This brings the annual point-to-point inflation rate to just 2.4 per cent. This is lower than the BOJ’s target range of 4 to 6 per cent.

The BOJ says inflation was lower than targeted because of a decline in agricultural prices in the December quarter, coupled with a significant reduction in international oil prices during the same period.

The Central Bank says there was also limited pass-through of improved domestic demand conditions to prices. This is the second time in less than a year that inflation has been too low. The Central Bank says the economy needs a level of inflation that is neither too high nor too low.

The bank says an inflation rate of between 4 and 6 per cent is judged to be appropriate for Jamaica at this time to ensure a range of desired economic outcomes. It says a lower inflation rate may be associated with some type of weakness in the economy.

The BOJ says it anticipates that annual inflation will again fall below the target at points during the March 2019 quarter and the latter half of fiscal year 2019/20. It says this near-term outlook reflects the current trends in international commodity prices, potential weakening in global demand and seasonal improvements in domestic agricultural food production.

The BOJ says it remains committed to fostering conditions that generate an acceleration in economic activity that will return inflation to the target range in the medium term.

As a result, the BOJ says it lowered its policy interest rate to just 1.75 percent in December.

The Bank says it expects financial institutions will pass on the lower rate to customers, resulting in increased economic activity.