BANK OF JAMAICA REDUCES THE POLICY RATE TO 6.00 PER CENT AS INFLATION STABILISES WITHIN THE TARGET RANGE
Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC), at its meetings on 18 and 19 December 2024, assessed that the prevailing economic environment is conducive to a further easing of its monetary policy stance and unanimously agreed to: (i) reduce the policy rate by 25 basis points (bps) to 6.00 per cent per annum, effective Monday, 23 December 2024; and (ii) preserve relative stability in the foreign exchange market. The lowering of the policy rate represents the fourth consecutive reduction for 2024.
This decision to ease monetary policy is based on inflation becoming anchored in the target range. Further, despite the impact of recent adverse weather on prices, inflation is expected to remain in the target range.
Annual headline inflation at November 2024, as reported by the Statistical Institute of Jamaica (STATIN), was 4.3 per cent, representing a trend reduction from 7.4 per cent at January 2024. Core inflation (which excludes the prices of agricultural food products and fuel from the consumer price index (CPI)) was 4.2 per cent at November 2024, representing the seventeenth consecutive month that core inflation fell below 6.0 per cent.
The deceleration in headline inflation over the year to November 2024 primarily reflected stability in some of its key drivers. The foreign exchange market and the private sector’s expectations about the level of future inflation remained relatively stable over the year. Anecdotal information suggests that wage pressures moderated in October 2024. This moderation was generally in line with projections. The non-recurrence of increases in selected administered prices also supported lower inflation. Further, despite the impact of recent adverse weather on agricultural supplies, which moved agricultural food prices upward, agricultural food price inflation was less than anticipated.
Over the next eight quarters, inflation is likely to remain within the Bank’s target range. There, however, remains an upside risk to the inflation projection in the context of the uncertainty associated with the potential changes to economic policies among Jamaica’s main trading partners. However, the timing and the extent of the policy changes are still highly uncertain.
The MPC judged that the current policy stance is appropriate. The scope for further policy easing will depend on the trajectory of inflation relative to the lower bound of the inflation target range. However, the MPC noted that interest rates on bank loans, along with other credit terms, remain high and restrictive, indicating that banks may have room to make downward adjustments in those rates.
Despite the positive trends in inflation, the Bank recognises that consumer prices in Jamaica are still high. In this context, the Bank remains committed to its primary mandate of maintaining low, stable and predictable inflation.
A summary of the Monetary Policy Committee’s discussions, which influenced the monetary policy decision, has been published on the Bank’s website at https://boj.org.jm/core-functions/monetary-policy/policy-schedule/summary-of-decisions/.
The date of the next policy decision announcement is 20 February 2025.
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