24 November 2025
BANK OF JAMAICA HOLDS THE POLICY RATE AND ACTS TO ENSURE ADEQUATE FOREIGN CURRENCY AVAILABILITY & INFLATION CONTROL AMIDST IMPACT OF HURRICANE MELISSA
Jamaica’s macroeconomic environment has been severely impacted by Hurricane Melissa. Current information suggests that the key macroeconomic indicators will deteriorate in the near term, due to extensive damage to infrastructure and disruption to productive activity and livelihoods. The economy is therefore projected to contract significantly over the near-term, while inflation will rise from its current level. The rise in inflation will reflect the hurricane’s impact on the major food-producing parishes and the second-round effects on the prices of other selected goods and services (such as routine household maintenance, transport, energy and personal care items).
During its meetings on 20 and 21 November 2025, Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC) deliberated on its monetary policy stance in the context of the post-hurricane environment and expressed its concern regarding the devastation caused by the hurricane and the considerable hardship and dislocation being suffered by many Jamaicans. The MPC determined that preserving a stable macroeconomic environment is essential to the recovery effort at the individual, household and national levels. In this regard, Bank of Jamaica (BOJ) remains committed to ensuring that the inflationary effects of the hurricane are managed in order to limit the hardships on vulnerable groups and to facilitate the conditions necessary for long-term economic recovery.
The Committee decided unanimously to (i) hold the policy rate (the rate offered to deposit-taking institutions (DTIs) on their current account balances at BOJ) at 5.75 per cent per annum, and (ii) take special pre-emptive measures to preserve relative stability in the foreign exchange market.
The decision to maintain the policy rate is based on the following factors:
- Annual headline inflation will rise sharply from 2.9 per cent, its outturn at October 2025, and will exceed the Bank’s inflation target of 4.0 to 6.0 per cent over the near-term.
- Core inflation (which excludes the prices of agricultural food products and fuel from the consumer price index (CPI)) will also rise, breaching the target range in mid-2026.
- The Government has signalled a temporary suspension of the fiscal rules to support the relief and recovery effort, which will facilitate increased spending in the economy.
- The risks to the inflation outlook are skewed to the upside. This means that higher inflation could result from higher-than-expected domestic demand to support reconstruction efforts, as well as higher-than-anticipated inflation expectations. There could also be long-term damage in specific industries which could slow the improvement in the production and availability of supplies. On the downside, inflation could be lower due to a slower-than-anticipated recovery in domestic demand associated with income loss.
- Without the MPC’s policy actions, which are carefully designed to limit inflationary impulses, ensure adequate supplies and support stability in the foreign exchange market, headline inflation will remain elevated for an extended period of time.
The special pre-emptive measures in the foreign exchange market contemplate the need for increased imports to support the rehabilitation and reconstruction efforts. The MPC notes that the Bank’s strong international reserves reinforce its ability to support the foreign exchange market. In this regard, the Bank has sold US$210 million to the market since the passage of the Hurricane. Going forward, in the short term, the Bank will also (i) provide foreign currency liquidity directly to selected entities in the energy sector and (ii) proactively ensure adequate foreign currency liquidity in the market, including the reintroduction of scheduled advanced notices of intervention sales. Bank of Jamaica is prepared to deploy other measures to maintain orderly conditions in the exchange rate market, as needed.
Holding the policy rate unchanged, complemented by the proactive measures to ensure stability in the foreign exchange market, will enable inflation to return to the target range by early 2027.
The MPC remains committed to its work programme to further strengthen the policy transmission process and reaffirms its commitment to maintaining low and stable inflation. To this end, the Committee will continue to closely monitor the incoming data and maintain heightened surveillance of the second-round impact of higher food prices on core inflation. The MPC is prepared to adjust the stance of monetary policy if the above-noted risks threaten the projected return of inflation to target.
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 18 December 2025.
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