Jamaica Raises Policy Rate to 6%

Jamaica’s central bank raised its policy rate by 50 bps to 6.0% at its September 2026 meeting as persistent inflationary pressures, higher commodity prices and geopolitical risks clouded the outlook. The bank noted inflation risks remain skewed to the upside. Headline inflation rose to 7.9% in August from 7.5% in July, remaining above the target range for a third consecutive month, while core inflation held at 5.2%. The bank expects inflation to rise further in the near term before returning to the target range by mid-2027. Drought conditions and intensifying El Niño are expected to keep agricultural prices elevated, while higher global commodity prices are feeding through to fuel, energy and transport costs. Recovery spending following Hurricane Melissa could add to pressures. Businesses’ 12-month inflation expectations rose to 7.3% in July from 6.7% in June.

Jamaica’s central bank kept its policy rate unchanged at 5.50% at its August 2026 meeting, as persistent inflationary pressures and geopolitical risks clouded the outlook. Headline inflation rose to 7.5% in July from 6.7% in June, remaining above the Bank of Jamaica’s target range, while core inflation increased to 5.2% from 5.0%. The BOJ expects inflation to remain above the target range in the September quarter before moderating. Tensions in the Middle East and the intensification of the Russia-Ukraine war are expected to keep fuel prices elevated, raising electricity, transport and other costs. Additional pressures could come from fiscal spending on post-Hurricane Melissa reconstruction and worsening drought conditions. Still, a stable exchange rate and healthy international reserves should help contain imported inflation. The BOJ said inflation risks remain skewed to the upside and it is prepared to adjust policy if needed. GDP growth for FY2026/27 is projected at 1%-3%.

The central bank of Jamaica kept its policy rate unchanged at 5.50% at its June 2026 meeting, noting that although inflation has remained within its target range over the past three months, the outlook remains uncertain. The central bank said inflation risks from geopolitical tensions have eased but remain elevated, with headline inflation expected to temporarily exceed the upper limit of the target range. It added that keeping policy unchanged is appropriate to contain second-round effects from higher international commodity prices. Headline and core inflation both accelerated, with the former exceeding the Bank's latest projection. While talks to end the Middle East conflict continue, uncertainty remains high. The BoJ also noted that international commodity prices remain elevated and volatile, US financial conditions have tightened, and domestic demand is recovering, though growth risks remain tilted to the downside.