- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 5.75%
The Bank of Jamaica’s Monetary Policy Committee kept its policy rate—the 5.75 % paid on DTIs’ current-account balances—unchanged after its 20-21 November 2025 deliberations, arguing that rate stability, combined with pre-emptive foreign-exchange (FX) measures, is essential to manage the inflationary fallout from Hurricane Melissa and to underpin economic recovery. This extends the hold in place since the Committee cut the rate by 25 bp in May 2025. To reinforce its stance, the central bank has already sold USD210 mn into the market, will provide FX liquidity directly to key energy firms, and is reviving scheduled, pre-announced FX sales, actions backed by what it describes as “strong” international reserves. Headline inflation was 2.9 % in October—below the 4–6 % target—but is projected to surge above the range in the near term as storm-induced crop losses and second-round effects lift food, transport and energy costs; core inflation is expected to breach the band by mid-2026. The economy is forecast to contract sharply amid extensive infrastructure damage, while a temporary suspension of fiscal rules will allow higher public spending to support relief and reconstruction. Inflation risks are skewed to the upside given reconstruction demand and rising expectations, though weaker post-storm incomes could temper pressures; the central bank pledges to tighten policy if needed and expects inflation to return to target by early 2027, with its next decision set for 18 December 2025.
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.