Jamaica Holds Policy Rate at 5.5%

The Bank of Jamaica maintained its policy rate at 5.50% during its March meeting as the inflation outlook became subject to a high degree of uncertainty stemming from the conflict in the Middle East. The central bank noted that while annual inflation remained at 3.9% in February sharp increases in international commodity prices and shipping costs are expected to drive headline and core inflation above the 4–6% target range during 2026. Although the magnitude of these impacts remains uncertain higher energy and transport costs alongside government tax measures pose significant upside risks to the projected path. While the post-hurricane recovery and fiscal spending continue to influence domestic prices the international reserves remain at high levels to provide a strong buffer and ensure market stability. Economic activity is projected to remain within the 1.0 to 3.0% range for the 2026/27 fiscal year despite downside risks to the tourism sector.

The Bank of Jamaica reduced its policy rate to 5.50% during its February meeting, as the direct impact of Hurricane Melissa on inflation proved less severe than initially anticipated. The central bank noted that a faster-than-expected improvement in agricultural supplies and recent exchange rate appreciation helped annual inflation fall to 3.9% in January, while the moderation of second-round price increases has accelerated the projected return to the 4–6% target range. Although temporary breaches of the target are possible in mid-2026, lower inflation expectations and stable core inflation have reduced the likelihood that prices will remain elevated for longer. While the post-hurricane recovery and fiscal spending pose upside risks, the international reserves remain healthy and are projected to improve further. Economic activity is projected to contract by -1.0 to -3.0% in 2025/26 before recovering in 2026/27, with the central bank remaining ready to adjust policy if needed.

The Bank of Jamaica held its policy rate at 5.75% during its December meeting, despite heightened inflation risks stemming from the severe economic impact of Hurricane Melissa. The central bank noted that damage to infrastructure is now estimated at more than 40% of GDP, while agricultural losses amount to roughly half of output, increasing the likelihood that food, electricity and other prices will rise faster and remain elevated for longer. These supply disruptions are expected to push inflation above the 4–6% target range in early 2026, with rebuilding activity also lifting core inflation through stronger demand and higher costs. Economic activity is projected to contract sharply in 2025/26 before recovering in 2026/27, supported by external financing, with the central bank remaining ready to adjust policy if needed.