Summary of Decisions – August 2025

Summary of
Monetary Policy Discussion and Decisions
August 2025

During its meetings on 18 and 19 August 2025, the Monetary Policy Committee (MPC) of Bank of Jamaica (BOJ) deliberated on the Bank’s monetary policy stance against the background of low domestic inflation amid global uncertainties. The MPC determined that the current stance of monetary policy remains appropriate to support the containment of inflation within the target range over the next two years.

In this regard, the MPC noted the following:

1. Inflation has generally tracked within the Bank’s target range of 4.0 to 6.0 per cent since March 2024. Annual headline inflation at July 2025, as reported by the Statistical Institute of Jamaica (STATIN), was 3.3 per cent, which was lower than the outturn a year ago and below the lower end of the Bank’s inflation target. Core inflation (which excludes the prices of agricultural food products and fuel from the consumer price index (CPI)) was 4.3 per cent at July 2025, also below the rate at July 2024. The reduction in headline inflation over the year primarily reflected the impact of falling energy prices, particularly for crude oil, but it was also affected by other temporary factors such as the non-repetition of increases in public transportation fares, the impact of a reduction in the General Consumption Tax (GCT) rate on electricity charges, and a faster pace of reduction in agricultural prices due to improved supplies. Moreover, inflation has been anchored by fairly stable inflation expectations (what business persons and consumers expect inflation to be in the future).

2. Over the next two years, headline inflation is projected to generally trend within the Bank’s target range, supported by moderating imported inflation and stable inflation expectations. However, inflation is forecast to remain below the lower end of the inflation target over the next few months before increasing towards the centre of the target range. These lower end projected breaches of the inflation target mainly reflect the temporary impact of improved agricultural supplies, following the shock to the Agriculture sector in 2024, as well as lower electricity costs in the context of the reduction in the GCT on electricity charges.     
3. In the face of changes in the United States (US) economic policies, the domestic economy has remained resilient. Remittance inflows for May 2025 continued to grow, while tourism arrivals improved in the June 2025 quarter. The current account of Jamaica’s balance of payments is in surplus and the international reserves are at a historically high level of US$6.1 billion as at July 2025, and are projected to improve further. Employment levels remain high, even as anecdotal data suggest that wage pressures are moderating. The Bank projects that for fiscal year (FY) 2025/26, real gross domestic product (GDP) growth will recover in the range of 1.0 to 3.0 per cent, largely due to positive performance in the Agriculture, Mining, and Tourism sectors. Subsequently, growth is forecast to normalise in the range of 1.0 to 2.0 per cent.
4. This economic outlook, however, continues to be clouded by the uncertainties in the global environment. The US continues to reset its trading relationships with its trading partners and tighten its immigration policies. These developments may slow the pace of economic activity and could stimulate inflationary pressures in the US with potentially adverse implications for the Jamaican economy. In this context, the US Federal Reserve (Fed) maintained its policy rate in July 2025 at the range of 4.25 to 4.50 per cent. With the expectation of a slowdown in output, the Fed is expected to reduce interest rates towards the end of 2025 and, thereafter, continue to reduce interest rates towards its neutral level.
5. The risks to the inflation forecast for Jamaica are skewed to the upside, which means that inflation could be moderately higher than projected. Higher inflation could stem from a sharper-than-anticipated increase in tariffs faced by the US trading partners, resulting in higher imported inflation and inflation expectations. In addition, inflation could be higher-than-projected if there is further escalation in geopolitical tensions, which could negatively impact international supply chains. Lower inflation could, however, result from lower-than-projected international commodity prices as well as weaker demand conditions.
6. In the context of this assessment, the MPC unanimously agreed to (i) maintain the policy rate (the rate offered to deposit-taking institutions (DTIs) on overnight placements with BOJ) at 5.75 per cent per annum, and (ii) preserve relative stability in the foreign exchange market.

The following data also informed the MPC’s decisions:

7. Imported inflation moderated in the June 2025 quarter, relative to the March 2025 quarter. Inflation in the US decelerated to 2.7 per cent at June 2025 from 3.0 per cent a year earlier. The average price of grains (including wheat, corn and soybeans) for the quarter was lower by approximately 9.1 per cent, compared to the June 2024 quarter.Additionally, shipping prices fell for the review quarter relative to a similar period in the previous year. Average oil prices for the June 2025 quarter also declined relative to the same quarter of the previous year. In contrast, average liquefied natural gas (LNG) prices increased for the June 2025 quarter relative to the similar period last year due primarily to increased demand for US exports. Over the near term, average grains and oil prices are forecast to fall by approximately 2.0 per cent and 5.0 per cent per year, respectively.
8. The nominal exchange rate depreciated during the June 2025 quarter because of temporary factors. The weighted average selling rate (WASR) of the Jamaica Dollar vis-á-vis the US dollar at end-June depreciated by 1.3 per cent, relative to end-March 2025 and by 2.6 per cent, relative to end-June 2024. This depreciation, which was slightly faster than that for the previous quarter, was particularly noticeable in April and May 2025 and was underpinned by temporary factors including the uncertainties associated with (i) developments in the global economy, (ii) the movement of the exchange rate through a psychological threshold, and (iii) a narrowing of the differential between domestic market rate and those in external markets. The temporary demand pressures created by these factors were eased by BOJ Foreign Exchange Intervention and Trading Tool (B-FXITT) sales of US$345.0 million for the quarter. 
9. In BOJ’s June 2025 survey of businesses’ inflation expectations, respondents generally maintained their expectations for inflation 12 months ahead at 7.1 per cent compared to 7.2 per cent in the prior survey. However, expectations about exchange rate depreciation increased. Consistent with this development, the dollarisation ratio – a measure of the public’s view about exchange rate risk – increased marginally.
10. The domestic banking system remains sound, with adequate capital and liquidity.
11. The domestic fiscal policy stance continues to pose no risk to inflation over the near term.
12. The MPC reaffirms its commitment to maintaining low and stable inflation and will deploy the tools necessary to preserve price and foreign exchange market stability. The Committee will continue to carefully monitor the incoming data and adjust its policy accordingly. Moreover, the MPC remains committed to its work programme to further strengthen the policy transmission process.

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Richard Byles

Chairman of the MPC
20 August 2025