- Decision
- Raise
- Rate change
- 50 bps
- policy rate
- 6%
The Bank of Jamaica (BOJ) unanimously raised its policy rate by 50 basis points to 6.0% effective September 29, 2026, seeking to limit second-round effects and prevent persistent inflation from becoming embedded in expectations amid elevated commodity and agricultural prices. Over the past year, BOJ held the rate at 5.75% through December 2025, cut it by 25 basis points to 5.50% in February 2026 and maintained that level through August. The rate applies to deposit-taking institutions’ current account balances at BOJ. Headline inflation rose to 7.9% in August, marking a third consecutive month above the 4.0%-6.0% target range, and is projected to increase further in the near term before returning to target by mid-2027. Demand conditions are improving during the post-Hurricane Melissa recovery, although fiscal-year 2026/27 growth remains vulnerable to agricultural, tourism-capacity and mining constraints, while the banking system remains sound, adequately capitalised and liquid. International reserves remain healthy, supporting adequate foreign exchange availability, and the exchange rate is expected to remain relatively stable. Escalating Middle East and Russia-Ukraine tensions have sustained high commodity prices, while global financial conditions have tightened faster than projected. BOJ said it would deploy additional tools if necessary to contain second-round inflation pressures and return inflation to target as quickly as possible.
Rate evolution
From June 2025 to September 2026, Bank of Jamaica moved the policy rate from 5.75% to 6.0%, holding it at 5.75% through late 2025, cutting it to 5.50% in February 2026, pausing through August and then raising it in September. 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, including on 25 and 26 June 2026, 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, with headline inflation rising to 5.5% in May and core inflation to 4.7%. At its meetings on 14 and 17 August, the Bank unanimously held the rate 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 geopolitical tensions, domestic demand pressures, drought and heat kept near-term inflation above target and risks skewed to the upside. At meetings on 24 and 25 September, Bank of Jamaica’s Monetary Policy Committee unanimously raised the policy rate by 50 basis points to 6.0%, effective 29 September 2026, after headline inflation increased to 7.9% in August while core inflation held at 5.2%, as escalating conflicts worsened persistently high commodity prices, El Niño prolonged agricultural price pressures and global financial conditions tightened faster than projected, prompting action to limit second-round effects and prevent elevated inflation from becoming further embedded in expectations.