- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 5.75%
Bank of Jamaica’s Monetary Policy Committee kept the policy rate—the rate on deposit-taking institutions’ current account balances at the central bank—unchanged at 5.75 % per annum, judging that maintaining a tight stance, alongside proactive foreign-exchange operations, is necessary to counter materially higher upside inflation risks stemming from Hurricane Melissa’s damage, now estimated at more than 40 % of GDP and 50 % of agricultural output. After a 25 bp cut to 5.75 % in May 2025, the rate has been on hold at subsequent meetings. The committee expects annual headline inflation, which accelerated to 4.4 % in November from 2.9 % in October, to jump above the 4–6 % target by early 2026 as food, energy and second-round price pressures intensify; core inflation rose to 4.3 % in November. Real GDP is projected to contract by 4-6 % in FY 2025/26 before a modest –1.0 % to 1.0 % range in FY 2026/27, while a one-year suspension of the fiscal rule will permit wider deficits to fund reconstruction. The current-account balance is set to weaken, but international reserves are deemed “robust,” supporting the bank’s pledge to preserve exchange-rate stability. The MPC will “closely monitor” data and stands ready to tighten policy if second-round effects or inflation expectations threaten a timely return to target, with the next decision scheduled for 23 February 2026.
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.