- Decision
- Maintain
- Rate change
- 0 bps
- policy rate
- 5.5%
The Monetary Policy Committee of the Bank of Jamaica on 20 May 2026 left its policy rate unchanged at 5.50 % per annum, judging the existing stance adequate to curb prospective second-round effects from a sharp, conflict-driven surge in global oil prices that threatens to push headline inflation above the 4–6 % target in the June and September 2026 quarters before easing as geopolitical tensions subside. After trimming the rate by a cumulative 50 bp through two 25 bp cuts in May 2025 and February 2026, the central bank has since held steady. The MPC will maintain special foreign-exchange support—direct FX sales to energy importers and pre-announced market interventions—to anchor market stability. Annual headline inflation was 4.3 % in April but is projected to breach the target temporarily, with moderation expected once oil supply normalises, though domestic demand linked to Hurricane Melissa reconstruction may temper the decline; FY 2026/27 GDP growth is forecast at 1–3 %, with risks tilted lower given potential tourism and cost-pressure headwinds. While the conflict is set to widen the external deficit, ample reserves are deemed sufficient to cushion shocks and contain FX volatility. The Committee highlighted elevated global commodity prices stemming from Middle East hostilities as the key external driver and signalled readiness to tighten policy should a prolonged conflict generate sustained inflationary pressure, with its next announcement scheduled for 29 June 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.