BANK OF JAMAICA MAINTAINS POLICY RATE AT 5.50 PER CENT AMID CONTINUING GLOBAL UNCERTAINTY
During its meetings on 25 and 26 June 2026, the Monetary Policy Committee (MPC/the Committee) of Bank of Jamaica (BOJ) noted that while inflation has remained within the Bank’s inflation target range of 4.0 to 6.0 per cent over the last three months, the inflation outlook remains uncertain. The Committee assessed that the risks to inflation from geopolitical tensions, while moderating, remain elevated, with inflation projected to temporarily breach the upper limit of the target range in the near term.
Accordingly, the MPC determined that maintaining the current monetary policy stance is appropriate to limit later (second round) price increases resulting from the recent increases in international commodity prices. The Committee therefore unanimously decided to: (i) maintain the policy rate (the rate offered to deposit-taking institutions (DTIs) on their current account balances at BOJ) at 5.50 per cent per year; and (ii) continue measures to preserve relative stability in the foreign exchange market.
The Statistical Institute of Jamaica reported that headline inflation at May 2026 was 5.5 per cent, which was above the Bank’s most recent projection. The outturn also represented the fourth consecutive month since the start of 2026 in which inflation trended upward. The higher annual or headline inflation at May, when compared with the rate at April 2026, was due mainly to higher prices for some agricultural produce and the pass-through of higher international commodity prices to the cost of selected commodities.
Core inflation (which excludes the prices of agricultural food products and fuel from the Consumer Price Index) at May 2026 was 4.7 per cent, which was above the outturn of 3.9 per cent at January 2026. This increase reflects second-round effects from higher imported commodity prices.
The environment underpinning the inflation outlook for Jamaica remains uncertain. While there are discussions to end hostilities in the Middle East, a final resolution has not yet been achieved. International commodity prices are generally falling but remain elevated and volatile. At the same time, financial conditions in the United States appear to be tightening as a result of higher inflation in that jurisdiction.
Selected indicators point to improving demand conditions in Jamaica in the context of a gradual post-Hurricane Melissa recovery. However, the risks to the growth outlook are skewed to the downside, although GDP growth is expected to remain within the projected range of 1.0 to 3.0 per cent for fiscal year (FY) 2026/27. A prolonged Middle East conflict could adversely affect the services industries, particularly tourism, through higher airline fares and weaker travel demand. In addition, a slower-than-expected restoration of mining activities following Hurricane Melissa and weaker consumer purchasing power associated with the rise in inflation, could also dampen demand and moderate price pressures.
Headline inflation, in this context, is projected to continue rising from 5.5 per cent at May 2026 and temporarily breach the upper limit of the target range in the near term. Core inflation is also expected to trend above the Bank’s target range over this period. The extent of the breach of headline inflation will, however, be lower than previously anticipated.The inflation outlook continues to reflect the impact of recent increases in international commodity prices on domestic energy and transport-related prices as well as the recent adjustment to public passenger fares. Higher inflation could also emanate from increased domestic demand associated with recovery spending by the Government of Jamaica and the normalisation of activity in selected sectors of the economy in the aftermath of Hurricane Melissa. Of note, businesses’ inflation expectations (what they expect the inflation rate to be) 12 months ahead remained relatively stable at 7.0 per cent in May 2026, relative to April 2026. Further, business operators reduced their expectations about the extent of depreciation in the foreign exchange market over the next year.
The risks to inflation over the next eight quarters are skewed to the upside (which means that inflation could be higher than projected). The main upside risk is a more extended and broader conflict in the Middle East, resulting in further increases in international commodity prices and their subsequent impact on domestic prices. A rise in inflation expectations could also contribute to higher second-round inflation. Higher inflation may also arise from a stronger-than-anticipated impact of increased domestic spending. On the downside, the effects of these factors on prices could be tempered by reduced demand arising from weaker consumer purchasing power.
International reserves remain healthy and continue to provide a strong buffer against the heightened geopolitical uncertainty by ensuring the availability of adequate levels of foreign exchange in the market. In this regard, the foreign exchange rate has remained stable with a marginal appreciation for the calendar year to 26 June 2026.
The Committee will continue to focus on its inflation-control mandate. High and rapidly rising prices have a considerable negative impact on vulnerable Jamaicans and on the broader economy. In the context of continued uncertainty, the Committee will closely monitor the incoming data and assess the implications for inflation and inflation expectations. The MPC is prepared to adjust its monetary policy stance if upside risks to inflation materialise.
A summary of the MPC’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 19 August 2026.
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