Bank of Jamaica Holds Base Interest Rate in May

The Bank of Jamaica maintained its policy rate at 5.50% during its May meeting as the inflation outlook remained highly uncertain amid escalating tensions in the Middle East and rising international commodity prices, particularly crude oil. The central bank noted that higher fuel and transport costs are expected to push headline inflation above the 4–6% target range during the June and September 2026 quarters from 4.3% in April. While inflation is expected to gradually moderate as geopolitical tensions ease and global oil supplies normalize, risks remain tilted to the upside due to the possibility of a prolonged conflict, adverse weather conditions, stronger inflation expectations, and higher domestic spending linked to Hurricane Melissa recovery efforts. Meanwhile, economic growth for fiscal year 2026/27 is projected within a 1.0% to 3.0% range, although risks remain skewed to the downside due to the potential impact of the conflict on tourism and domestic activity.

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.