Higher taxi fares just pushed Jamaica’s inflation to a 10-month high! Yikes!

Jamaica’s point-to-point inflation rate in December was almost 7%. 

Point-to-point inflation is the change in the price of goods and services from one point to the next. In this case, it’s from December 2022 to December 2023. 

According to the Statistical Institute of Jamaica, STATIN, the overall cost of goods and services was almost 7% higher this December than in December 2022. It was also the highest inflation has been since February 2023.

And we were doing good for a couple of months there. Inflation dipped within the Bank of Jamaica’s target range of 4-6% in September and October. So what’s causing it to go up again?

Well, there were a couple of factors, but the biggest one was transportation costs. Specifically, passenger vehicle fares aka taxis, minibus and coaster fares.

See in the Consumer Price Index (CPI), which is what STATIN uses to calculate inflation, some categories carry more weight than others. 

Typically food, housing, utilities and transportation impact inflation the most.

Now for December’s inflation, you can see that the major contributors were food and non-alcoholic beverages, restaurants and accommodation services. But transport was up almost 11%! 

STATIN said that big jump was mainly due to the increase in taxi fares. 

Remember back in October, the Government approved a 35% increase in PPV fares. 

The first 19% went on almost immediately, and the remaining 16% will be applied this April. So that increase in prices is what’s driving up inflation.

Now this wasn’t completely unexpected. The BOJ said as much when the increase was announced. They warned that the rise in fares could add as much as two percentage points to inflation since transportation is one of the categories that carries more weight in the CPI.

The Government tried to preempt this by cutting JUTC bus fares, to offset the increase in PPV fares. 

JUTC bus fares were all cut around 30%. The hope is that the lower bus cost will prompt more people to take JUTC buses instead of taxis and help bring down some of the inflation pressure.

But that JUTC fare cut only took effect on January 1, so we won’t know if it’s helping at all until February’s inflation numbers come out sometime in March. 

Also, people have a lot of complaints about how JUTC buses run, so how many people are actually gonna make the switch? 

If nothing changes with inflation, the BOJ might have to increase interest rates again to help bring it under control. 

The BOJ kept its base policy rate at 7% all of 2023, but if inflation starts to get out of hand again, they may decide to raise it, which would impact your ability to buy a house, get a car, fund a business, and other things you may want to borrow for.

And that’s the bottom line.