On the occasion of its meeting on 07 July 2026 and following its review of the financial system’s performance and systemic risks based on data up to March 2026, while also considering developments in the June 2026 quarter, including plans to de-escalate hostilities in the Middle East and their implications for global and domestic financial conditions, the Financial Policy Committee (FPC) issues the following statement:
The domestic economy contracted by 4.1 per cent in the March 2026 quarter, reflecting the effects of Hurricane Melissa in October 2025. Notwithstanding these developments, key domestic prudential metrics remained within prescribed thresholds. This resilience reflects the sector’s stable financial position, supported by sound regulatory oversight and broadly stable macroeconomic fundamentals. Specifically, inflation remained contained within the Bank’s target range of 4.0 to 6.0 per cent, while the policy interest rate was reduced to 5.50 per cent during the review period. Concurrently, exchange rate volatility moderated, resulting from a slower pace of depreciation of 0.2 per cent year-over-year at end-March 2026. Meanwhile, the Jamaica Stock Exchange Main Index increased by 8.8 per cent during the review quarter, reversing the declines observed during the previous quarter.
In light of the peace deal announced between the United States and Iran, geopolitical tensions in the Middle East may ease. However, global uncertainty could persist as a source of adverse risk to domestic financial stability in the near term. These conditions may continue to dampen economic growth and borrowers’ repayment capacity, particularly as the recovery from Hurricane Melissa continues. By extension, insurance companies may face upward pressure on costs, reflecting post‑hurricane effects, with potential implications for affordability and insurers’ profitability. At the same time, the pace of monetary policy easing remains uncertain amid continuing inflationary pressures, while financial market volatility could lead to higher valuation losses across financial institutions.
Against this background, stress scenarios were conducted to assess financial institutions’ ability to withstand credit, liquidity, and market risk shocks. The results indicate that financial system sub-sectors generally maintain sufficient capital to withstand macro-financial stress. However, regulators and financial institutions will need to remain attentive to institution-specific market risk exposures.
In this context, financial system supervisors remain vigilant in monitoring risks and committed to strengthening risk mitigation frameworks and advancing priority reforms. Accordingly, progress continues on regulatory priorities including Twin Peaks, Basel III implementation and measures to address cyber and climate-related risks are expected to further enhance the system’s ability to withstand shocks.
Financial Policy Committee
07 July 2026
