Summary of Decisions – August 2026

Summary of
Monetary Policy Discussion and Decisions
August 2026

During its meetings on 14 and 17 August 2026, the Monetary Policy Committee (MPC/the Committee) of Bank of Jamaica (BOJ) noted that the inflation outlook remains uncertain amid the unresolved tensions in the Middle East and the intensification of the Russia-Ukraine war. These developments have resulted in persistently volatile and elevated international commodity prices, particularly for crude oil. Notwithstanding the global situation, the exchange rate has remained stable, helping to contain some of the pass-through of higher international prices to domestic inflation. The Committee assessed that inflation is projected to remain above the upper limit of the target range in the near term and that the risks to the outlook remain elevated.

The MPC noted that the decision to maintain the policy rate is based on the following factors:

1. The Statistical Institute of Jamaica reported that headline inflation at July 2026 was 7.5 per cent, which is above the 6.7 per cent recorded at June 2026 and the 3.3 per cent recorded at July 2025. This outturn, which was lower than the Bank’s most recent projection, represented the second consecutive month since September 2024 in which inflation exceeded the upper limit of the Bank’s target range. The higher headline inflation at July 2026 relative to the previous month mainly reflected the second phase of increases in route taxi and hackney carriage fares and the pass-through of higher international commodity prices to electricity rates and selected services.
2. Core inflation (which excludes the prices of agricultural food products and fuel from the Consumer Price Index) at July 2026 was 5.2 per cent, which is above the 5.0 per cent recorded at June 2026 and the 4.3 per cent recorded at July 2025. This increase partly reflects emerging, though still limited, second-round effects stemming from higher prices for imported commodities, particularly energy and transport, as well as elevated domestic agricultural food prices.

3. Since the Bank’s assessment in June 2026, the hostilities in the Middle East have remained unresolved and the Russia-Ukraine war has intensified. As a result, international fuel prices are projected to remain elevated over the near term. This is expected to continue to place upward pressure on electricity and gas prices in Jamaica. In addition to these immediate impacts, higher energy and transport costs are expected to contribute to second-round increases in the prices of goods and services across the economy, where the Bank’s monetary policy is largely focused at this time.
4. In this context, the projection is for headline inflation to continue to breach the upper limit of the Bank’s target range over the September 2026 quarter, before moderating toward the target range over the near term. The extent of the breach will depend on the severity and duration of the conflict in the Middle East, and both variables remain highly uncertain. Core inflation is also projected to temporarily trend above the Bank’s target range before moderating over this period. The higher projected inflation largely reflects the impact of increased imported inflation primarily associated with the rise in international commodity prices and increased domestic demand pressures, largely stemming from an expansionary fiscal stance to support the post-Hurricane Melissa rebuilding efforts. In addition, a rise in agricultural inflation amid worsening drought and heat conditions will influence higher prices over the next few months. Second-round effects from higher commodity prices on the costs of services and processed food, will also contribute to inflation. These pressures are, however, expected to be contained by the relatively stable exchange rate.
5. The risks to the inflation forecast 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 and further escalations in the Russia-Ukraine war, 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. Further, higher inflation may arise from a stronger-than-anticipated impact of increased domestic spending and more prolonged drought conditions. On the downside, the effects of these factors on prices could be tempered by reduced demand resulting from weaker consumer purchasing power.

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 following considerations also informed the MPC’s decisions:

6. Growth in real gross domestic product (GDP) for fiscal year (FY) 2026/27 is projected within the range of 1.0 to 3.0 per cent. The risks to the GDP outlook are skewed to the downside, reflecting the potential adverse effects of the tensions in the Middle East and between Russia and Ukraine, on the services industries, particularly tourism and related activities. In addition, higher input costs associated with imported inflation are likely to weigh on domestic economic activity. Further, a longer than anticipated recovery and reconstruction phase from Hurricane Melissa could retard growth.
7. The Federal Reserve (Fed) maintained its monetary policy target for interest rates within the target range of 3.50 to 3.75 per cent in July 2026. The Fed Chair noted that economic activity is expanding at a solid pace despite elevated uncertainty and that productivity growth and capital investment are strong. Further, job gains have kept pace with the workforce, and the unemployment rate has remained relatively stable. However, the Fed Chair noted that inflation remained elevated, in part reflecting supply shocks that have driven price increases in selected sectors, including energy.
8. Imported inflation increased in the June 2026 quarter, relative to the March 2026 quarter. Inflation in the United States increased to 3.5 per cent at June 2026 from 2.7 per cent a year earlier. West Texas Intermediate (WTI) crude oil prices for the quarter rose by 29.3 per cent relative to the previous quarter and are projected to remain elevated over the next two years. The increase in oil prices is supported by supply constraints amid heightened geopolitical tensions in the Middle East. Further, average grains price (including wheat, corn and soybeans) for the quarter increased by 4.1 per cent, compared with the March 2026 quarter, while shipping prices rose by 35.0 per cent. Should tensions in the Middle East ease, average oil and grains prices are forecast to decline by 3.6 per cent and 0.2 per cent, respectively, over the near term.
9. Private sector credit growth remained relatively stable in the June 2026 quarter at 7.4 per cent from growth of 7.9 per cent in the June 2025 quarter. This reflected a deceleration in business credit growth to 6.5 per cent from 10.0 per cent in June 2025, while credit to individuals accelerated to 7.9 per cent from 6.9 per cent a year earlier. Private sector credit grew by 6.3 per cent in the March 2026 quarter.   
10. The domestic fiscal policy stance continues to pose some risk to the inflation profile over the near term.
11. Jamaica’s 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 14 August 2026.
12. The country’s banking system remains sound and is adequately capitalised with sufficient liquidity.
13. 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 and threaten the return of inflation to the target range in the shortest possible time.

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Richard Byles

Chairman of the MPC
18 August 2026