- Decision
- Lower
- Rate change
- 25 bps
- policy rate
- 5.5%
Bank of Jamaica’s Monetary Policy Committee cut the policy rate offered on deposit-taking institutions’ current-account balances by 25 bp to 5.50 % effective 24 February 2026, judging that faster-than-expected recovery in agricultural supplies, a mild exchange-rate appreciation and easing second-round pressures will keep inflation broadly within the 4–6 % target over the next eight quarters, with only temporary breaches mid-2026. After a 25 bp reduction to 5.75 % in May 2025 the rate had been held steady until December, making this the first move in nine months. The Committee will continue “proactive” operations to preserve foreign-exchange stability. Annual headline inflation fell to 3.9 % in January from 4.5 % in December, with core inflation also easing to 3.9 %; inflation expectations are projected to normalise, while real GDP is expected to contract by 1–3 % in FY 2025/26 before rebounding to 1–3 % growth in FY 2026/27 amid balanced inflation risks and downside-skewed growth risks. Private-sector credit growth has been steady, led by household borrowing, and the banking system remains well capitalised and liquid. Although hurricane-related rebuilding will widen the current-account deficit in the near term, international reserves are deemed healthy and set to strengthen further. Global considerations include a January hold by the US Federal Reserve at 3.50–3.75 % and rising oil prices driven by US–Iran tensions, partially offset by lower grains and LNG prices. The MPC reiterated its readiness to adjust policy if incoming data jeopardise the projected path for inflation.
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.