The Bank of Jamaica (BOJ) says it overestimated the impact of the reductions in commuter fares for the Jamaica Urban Transit Company (JUTC) had on inflationary pressure.

The Central Bank had to walk back on the estimation on Friday (February 23) following this week’s revelation by Governor Richard Byles that the two-phase reduction in JUTC fares will have little to no impact on inflation.

“In early November 2023 the Bank shared with the Minister of Finance and the Public Service, Nigel Clarke, its concern that inflation was projected to rise above the target range over an extended period, driven largely by the public passenger vehicle (PPV) fare increases announced by the Government on October 10, 2023 to take effect in October 2023 (19 per cent) and April 2024 (16 per cent),” the bank conceded.

At the time, the BOJ also shared with the minister an estimate of the cumulative impact of the increases in PPV fares as contributing approximately two percentage points to annual inflation.

The Central Bank then advised Clarke of its estimate of required reductions in JUTC fares to cushion the impact of the announced PPV fare increases.

“Subsequently, on November 12, 2023, the minister announced in Parliament the temporary two-phase reduction in JUTC fares to support BOJ’s inflation targeting mandate,” the BOJ noted in its statement.

It said upon review, the bank now recognises that it had overestimated the impact of the reductions in JUTC fares on inflation.

The BOJ says it takes full responsibility and apologises for this error.

Last November, Clarke announced a temporary reduction in fares for JUTC commuters, which he explained was geared to keep inflation within the targeted four-to-six per cent range.

The reduction, which took effect on January 1, saw fares for regular passengers moving from J$100 to J$70, and for pensioners from J$40 to J$30. Student fares moved from J$30 to J$25.

Clarke also announced that there will be a further reduction in fares for JUTC passengers come April, which will see regular fares moving from J$70 to J$50. Student fares will move from J$25 to J$20 and pensioners from J$40 to J$30.