- Decision
- Lower
- Rate change
- 25 bps
- policy rate
- 5.75%
Bank of Jamaica’s Monetary Policy Committee on 21 May 2025 cut the policy rate—the overnight deposit rate for deposit-taking institutions—by 25 bp to 5.75 percent, aiming to support activity while judging that inflation will stay within the 4–6 percent target as domestic price pressures, wages and the exchange rate remain contained. After keeping the rate at 6.00 percent in February and March, the Committee also reaffirmed its commitment to “preserve relative stability” in the foreign-exchange market; gross international reserves stood at USD 5.9 billion (about 135 percent of the IMF ARA benchmark) after net BOJ purchases of roughly USD 1.1 billion in the 12 months to April, and the JMD had depreciated 1.9 percent year on year by 14 May. Annual headline inflation was 5.3 percent in April, with core inflation at 4.4 percent, while FY 2024/25 GDP is estimated to have contracted by 0.5–1.0 percent before recovering to 1.0–3.0 percent growth in FY 2025/26 amid rebounds in mining, tourism and construction. The MPC sees only a moderate pass-through from recent US tariff moves, helped by lower oil prices, and projects inflation to stay in target over the next two years, but warns that upside risks from sharper tariff hikes or geopolitical shocks could prompt further policy tightening to defend its price and FX stability mandate.
Rate evolution
From June 2025 to August 2026, Bank of Jamaica lowered the policy rate by 25 basis points, from 5.75% to 5.50%, after an extended hold at 5.75% through late 2025, a February 2026 cut and subsequent pauses. Early in the period, it judged the stance appropriate because headline inflation was either within or below the 4.0% to 6.0% target largely for temporary reasons, core inflation remained around target, demand and growth were improving, and the labour market was tight, even as global trade policy, geopolitical tensions and foreign exchange volatility kept risks skewed to the upside and prompted continued foreign exchange stabilisation measures. That assessment shifted after Hurricane Melissa, when the Bank held at 5.75% despite a projected contraction because the inflation shock was seen as supply-driven, with higher food prices, second-round effects, reconstruction spending and suspended fiscal rules raising upside risks, before cutting to 5.50% in February as agricultural supplies recovered faster than expected, the exchange rate appreciated mildly, inflation undershot projections and risks became balanced.
In subsequent decisions, Bank of Jamaica kept the rate at 5.50% as Middle East conflict lifted oil, liquefied natural gas, fertiliser and shipping costs, raising the risk of second-round inflation while weighing on growth. It maintained that stance on 25 and 26 June 2026 as inflation remained within target but the outlook stayed uncertain, geopolitical risks remained elevated and international commodity prices threatened later second-round increases, with headline inflation rising to 5.5% in May and core inflation to 4.7%. At its meetings on 14 and 17 August 2026, the Bank unanimously held the rate at 5.50% and continued measures to preserve relative stability in the foreign exchange market, judging the stance appropriate to limit second-round price increases after headline inflation rose to 7.5% in July and core inflation to 5.2%, while unresolved Middle East tensions, the intensifying Russia-Ukraine war, domestic demand pressures and worsening drought and heat conditions kept near-term inflation above the target range and risks skewed to the upside despite exchange-rate stability.