Don’t expect any immediate relief from the high level of inflation.
That’s the message that came from the Central Bank of The Bahamas yesterday as it released its latest economic and financial developments report.
The bank reported that domestic inflation – as measured by changes in the average Retail Price Index (RPI) for The Bahamas – continued to reflect the pass-through effects of higher global oil prices.
During the 12 months to April, average consumer price inflation accelerated to 3.8 percent from 0.4 percent in the corresponding period of 2021.
Central Bank Governor John Rolle said the average inflation rate in The Bahamas will continue to move a bit higher in the near term.
“Right now, the official estimates have been placing the Bahamian inflation rate below five percent, but still significantly higher than a year or two years ago,” said Rolle during a quarterly media briefing yesterday.
“So, we are feeling the impact in terms of the higher costs of imported goods and services as well as in fuel costs.
“What I think we also need to appreciate, as has been said on several occasions, is that this is inflation that is being imported by The Bahamas, so it isn’t something that we should expect a significant or much ability at all on the Bahamian side in terms of influencing the rate that’s coming through.”
Rolle said rates are still below where they are expected to peak in The Bahamas.
“We have to appreciate that if inflation in the United States is seven [or] eight percent and we are still rising toward five percent, that since we are importing largely goods that are originating in the US, that we are going to see more of that reflected in our prices,” he said.
“Where we have some hold off in terms of The Bahamas, is for a while, the pass through of electricity costs has not been as direct as in the past, and energy costs is one of the big components in how we estimate the inflation rate for the public.
“So that is very important, and we understand that in the case of the electricity suppliers, both in New Providence and Grand Bahama – we went through periods where the hedging of fuel costs would have dampened some of the impact of higher oil prices that were in the market.”
The most recent retail price index, released yesterday along with the “Monthly Economic and Financial Development” report for June, showed that for the 12 months to April, there was a 13.7 percent increase in transportation, a 12.4 percent increase in communication, and a 2.3 percent increase in education over the same period a year prior.
Additionally, clothing and footwear saw a 5.6 percent increase, food and non-alcoholic beverages went up by 4.9 percent, and restaurant and hotels prices increased by 4.7 percent.
Similarly, health costs accelerated by 4.3 percent; alcoholic beverages, tobacco and narcotics increased by 3.9 percent; and housing, water, gas, electricity and other fuels went up by 2.8 percent.
The only category that saw a decrease was the recreation and culture segment of the economy which slowed by 1.6 percent; and the average cost for furnishing, household equipment and maintenance remained relatively unchanged at 2.4 percent, the data showed.
Rolle said as prices increase, finance officials will have to keep a close eye on the level of drawdown on foreign exchange to pay for those imported goods.
“What’s important is that the economy is able to adjust prudently because higher inflation for us really means that there is an additional amount in every dollar that we spend to import; there is an additional amount of foreign exchange represented in that, that is as a result of the higher prices,” he said.
“So, the higher prices for us is an increased claim on the amount of foreign exchange that we need to use to pay for our goods and services. So, at a national level, there is going to be some managing of expenses in the future so that we can continue to satisfy our import needs.”