- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 5.75%
The Bank of Jamaica’s Monetary Policy Committee left its policy rate unchanged at 5.75 % per annum at its August 21 meeting, judging the existing stance sufficient to keep inflation within the 4–6 % target over the next two years amid currently subdued price pressures, ongoing economic growth, healthy external balances and an uncertain global outlook. After a 25 bp cut in May 2025 the rate has been held steady in June and now August. The Committee will also “continue to pursue measures to preserve relative stability” in the foreign-exchange market, noting that it sold USD1.2 bn and made net purchases of about USD931 m via its B-FXITT facility in the 12 months to July. Headline inflation slowed to 3.3 % y/y in July—below the target floor—while core inflation eased to 4.3 %; the Bank expects temporary factors such as lower energy and food costs and tax cuts to keep inflation below target in coming months before it moves back into the band, with risks skewed modestly to the upside. GDP is estimated to have grown 1–2 % y/y in Q2 and is projected to expand 1–3 % in FY 2025/26, supported by agriculture, mining and tourism, while employment remains high and wage pressures moderate. The current-account surplus persists, gross reserves reached a record USD6.2 bn (148 % of the adequacy metric) by 12 August, and the JMD’s depreciation moderated after a 2.5 % slide in H1, helped by interventions. Policymakers highlighted global trade and geopolitical uncertainties and potential US policy shifts as key external risks but reiterated their commitment to a flexible exchange-rate regime and signalled readiness to adjust tools if incoming data threaten the inflation objective.
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.