Businesses expect the local currency to slide towards $115 to US$1 by August 2015, a slower pace than previously expected, according to a Bank of Jamaica (BOJ) report.
It signals growing stability in the financial sector which, up to mid-year, suffered from faster depreciation.
The expected depreciation would result in 3.8 per cent decline over the review period against its US counterpart. In June, respondents expected the dollar to lose 5.8 per cent of its value over 12 months.
“Relative to the survey in June 2014, respondents expected a slower pace of depreciation in the domestic currency for the three-month, six-month and 12-month period beyond the survey date,” stated the BOJ Inflation Expectation Survey prepared by the bank’s Research Services Department and which contained data from 292 respondents.
The currency lost 14.4 per cent of its value in 2013 and an additional five per cent since January. Since June 2014, the slide tapered off based on an influx of foreign currency linked to the International Monetary Fund (IMF) loan agreement. At the time, the BOJ and the IMF separately indicated that the currency gained competitiveness against the greenback.
In the survey, businesses stated that they expect inflation to dip slightly towards 10.4 per cent for the 2014 calendar year, down from 10.7 per cent expected in the previous survey.
“The results of the August 2014 survey reflected an improvement in businesses’ perception of inflation control by the authorities when compared to the previous survey. Specifically, the index of inflation control increased to 156.6 from 149.9 in the June 2014 survey. This improvement mainly reflected an increase in the number of respondents who were ‘satisfied’ with the authorities’ control of inflation,” stated the BOJ.
The survey captured the perceptions of chief executive officers, managing directors and financial controllers about the future movement of prices, current and future business conditions and the expected rate of increase in wages/salaries. The BOJ said that these responses assist it in charting future policy decisions.
– Steven Jackson
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Business sector forecasts slow slide to J$115 = US$1
