Summary of
Monetary Policy Discussion and Decisions
June 2025
Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC), during its meetings on 25 and 26 June 2025, determined that its current policy stance continues to be appropriate to support inflation remaining within the target range over the next two years. This view is in a context of continued uncertainty around global trade policy and the path of interest rates in the major developed markets, as well as recent geopolitical developments that have shifted inflation risks to the upside.
In this regard, the MPC noted the following:
- While the risks to the inflation forecast are skewed to the upside (which means that inflation could be higher than projected), the Bank expects inflation to remain within its target range of 4.0 to 6.0 per cent over the next eight quarters. The private sector’s expectations of the level of inflation in the future, a key driver of headline inflation, have stabilised. Other international drivers of headline inflation, such as grains, liquefied natural gas (LNG) and oil prices, have generally trended down. However, geopolitcial tensions, if prolonged or intensified, could cause upward pressures on international commodity prices. In addition, while the direct impact on domestic inflation of recent changes in global trade policy is expected to be moderate, the second-round impact of these policies could be higher than anticipated.
- Inflation has remained stable within the Bank’s target range of 4.0 to 6.0 per cent since September 2024. Annual headline inflation at May 2025, as reported by the Statistical Institute of Jamaica (STATIN), was 5.2 per cent, in line with the outturn at May 2024. Core inflation (which excludes the prices of agricultural food products and fuel from the consumer price index (CPI)) was 4.6 per cent at May 2025, remaining below the upper limit of the target since July 2023.
- Against the background of these developments, the MPC, therefore, unanimously agreed to (i) hold 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) continue taking measures to preserve relative stability in the foreign exchange market.
The following considerations also informed the MPC’s decisions:
- The outlook for real economic activity for fiscal year (FY) 2025/26 and FY2026/27 is likely to be in line with the last forecast. Preliminary indicators suggest that the economy should expand in the June 2025 quarter, resulting from expansions in tourism and its allied services. Thereafter, economic activity is anticipated to strengthen throughout FY2025/26. In this context, real gross domestic product (GDP) is projected to recover in FY2025/26 in the range of 1.0 to 3.0 per cent, largely due to growth in the Mining, Tourism, and Construction sectors.
- In May 2025, headline inflation in the United States (US) increased to 2.4 per cent from 2.3 per cent in April 2025. Inflation in the US is projected to remain above the US Federal Reserve’s (Fed) target of 2.0 per cent for the remainder of 2025. For the March 2025 quarter, US GDP contracted by 0.5 per cent, reflecting an increase in imports. Imports increased sharply as businesses and consumers front-loaded purchases ahead of anticipated tariffs.
- The Fed maintained its monetary policy target for interest rates at 4.25 to 4.50 per cent in June 2025. The Fed noted that the uncertainty around the economic outlook has diminished but remains elevated and that future monetary policy decisions will continue to be based on the incoming data.
- The outturns for selected external indicators including oil, grains and LNG prices were mixed. The average of daily West Texas Intermediate (WTI) crude oil prices for April and May 2025 declined by 5.3 per cent, a larger decline than the Bank’s forecast. However, prices increased in June 2025, reflecting escalating tensions in the Middle East. Average grains prices (wheat, corn and soybean) increased month-over-month by 0.8 per cent in April 2025 and declined by 1.1 per cent in May 2025, compared with the Bank’s projection for increases in both months. For LNG, average prices for April and May 2025 declined by 8.2 per cent, relative to the projection for a smaller pace of decline, reflecting weaker-than-anticipated global demand. International fertiliser prices, on average, increased by 4.6 per cent over April and May 2025.
- In BOJ’s May 2025 survey of businesses’ inflation expectations, respondents’ expectations for inflation 12 months ahead were stable at 7.2 per cent relative to the previous survey.
- The domestic banking system remains sound with adequate capital and liquidity.
- The domestic fiscal policy stance continues to pose no risk to inflation over the near term.
- The MPC reaffirms its commitment to maintaining low and stable inflation and will deploy the tools necessary to preserve stability. To this end, the Committee will continue to monitor the incoming data and adjust its policy accordingly.
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Chairman of the MPC
30 June 2025
