BANK OF JAMAICA MAINTAINS THE POLICY RATE AT 6.00 PER CENT
Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC), at its meetings on 18 and 19 February 2025, deliberated on its monetary policy stance in the context of increased uncertainty relating to the economic policies of Jamaica’s main trading partner, and against the background of a review of the latest domestic macroeconomic data. The MPC assessed that recent trends and the outlook for key domestic macroeconomic indicators remain positive. Domestic inflation is projected to remain within the Bank’s target range of 4.0 to 6.0 per cent over the next eight quarters. The exchange rate has been fairly stable and the private sector’s expectations of future inflation (inflation expectations), a key driver of headline inflation, have stabilised. Employment levels remain high and anecdotal data suggest that wage pressures are moderating. Real gross domestic product (GDP) activity is projected to recover in 2025, following a decline in the September 2024 quarter and an estimated contraction for the December 2024 quarter, as announced by the Planning Institute of Jamaica. The current account of Jamaica’s balance of payments is projected to remain in surplus over the near term, and the international reserves are healthy and are projected to improve further. At the global level, the United States (US) Federal Reserve has paused its monetary loosening and US long-term external bond yields are rising.
Considering the domestic and global economic dynamics, the MPC determined that the current policy rate continues to be appropriate to support inflation remaining within the target range and maintain relative stability in the foreign exchange market. The Committee, therefore, unanimously agreed to: (i) hold the policy rate at 6.00 per cent per annum; and (ii) preserve relative stability in the foreign exchange market.
The Statistical Institute of Jamaica, on 17 February 2025, reported that annual headline inflation at January 2025 was 4.7 per cent, representing a general trend reduction from 7.4 per cent at January 2024. The deceleration primarily reflected the impact of lower inflation for regulated items (such as bus and taxi fares) and a general lowering and stabilisation of inflation expectations. Core inflation (which excludes the prices of agricultural food products and fuel from the consumer price index (CPI)) was 4.0 per cent at January 2025, remaining consistently below 6.0 per cent since July 2023.
Over the next two years, inflation is projected to remain well-anchored within the Bank’s target range. However,the risks to the inflation forecast are skewed to the upside (which means that inflation could be higher than projected). Uncertainty related to potential economic policy changes in the US could have adverse implications for inflows through the current account of Jamaica’s balance of payments, as well as inflation expectations. Worse-than-anticipated weather conditions in Jamaica could also put upward pressure on inflation. On the downside, lower inflation could result from weaker-than-projected demand.
The MPC reaffirmed its commitment to maintaining low and stable inflation and will deploy all the necessary tools to preserve stability. The Committee agreed that it would be prepared to adjust the stance of monetary policy if the above-noted risks crystallise and result in an upward deviation from the inflation target.
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 27 March 2025.
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