AS THE Bank of Jamaica (BoJ) prepares for its first press conference for 2005 in a few days, it may well reflect on 2004 as a somewhat bittersweet year.
As far as interest rates are concerned, it was smooth sailing, and as soon as improving fiscal conditions and rising investor confidence provided the breathing space, the central bank aggressively adjusted them all of eleven times in 2004, even shaving them three times in one month.
Inflation, however, proved more of a challenge.
INFLATION SPIKE
Fiscal-related upheavals in the financial markets resulted in an inflation spike in 2003, just as the country was starting to take for granted the single-digit inflation regime that the present management of the BoJ had engineered since the mid 1990s.
Returning to single digit inflation in the year immediately following such a spike was never going to be easy, and shrewd analysts noted that such promises were only coming from those who usually make promises.
Then, when oil prices started running away, everyone quickly declared hopes of single-digit inflation dead and buried. Again, the central bank refused to join the chorus, only giving the assurance that inflation would be lower than 2003 - oil or no oil.
The inflation figures now available indicate that the central bank was quietly on the path to achieving the improbable.
In spite of the huge surge in oil prices that battered the economy all year long, inflation was |running at only 4.7 per cent for the first six months of the fiscal year, and with inflation normally very low in the last quarter of the fiscal year, it now seems that something less than 10 per cent was indeed on the cards after all.
Then, came 'Ivan', and single-digit inflation was indeed history for another year.
Despite this disappointment, the BoJ can still console itself with one thing latest figures indicate that it will keep the only promise it made about inflation- in spite of high oil prices and a hurricane, the figure will indeed still be lower than what the economy endured in 2003.
STABLE RATE
On the other side of the coin, in spite of the ups and downs of oil prices and hurricanes, there was still one thing that the folks at Nethersole Place might have thought about popping champagne corks over if central bankers were the champagne-popping type. The country's exchange rate has enjoyed its most stable year in six years.
The 1.72 per cent rate of depreciation in the Jamaican dollar in 2004 reflected its best performance since the 1.53 per cent recorded for 1998, and the overall appreciation recorded in the last three months of the calendar year was the first quarter to record appreciation since the first quarter of 1998.
So all in all, while the central bank must be commended for so ably steering its part of the economic ship safely through some rough waters last year, the BoJ probably cannot help but reflect that a few external circumstances robbed it of what could have been one of its best years ever.
Better luck in 2005.
