Summary of Decisions – March 2025

Summary of
Monetary Policy Discussion and Decisions
March 2025

Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC), during meetings on 25 and 26 March 2025, deliberated on its monetary policy stance in the context of increased uncertainty relating to the economic policies of Jamaica’s main trading partners. In this regard, the MPC noted the following:

1. Inflation has stabilised in the Bank’s target range. Annual headline inflation at February 2025, as reported by the Statistical Institute of Jamaica (STATIN), was 4.4 per cent, representing a trend reduction from 6.2 per cent at February 2024. Core inflation (which excludes the prices of agricultural food products and fuel from the consumer price index (CPI)) was 3.8 per cent at February 2025, representing the twentieth consecutive month that core inflation fell below 6.0 per cent.

2. The reduction in headline inflation primarily resulted from stability in several key drivers of inflation. The exchange rate has remained generally stable, given a surplus on Jamaica’s external accounts and BOJ’s monetary policy actions. Since 2024, the private sector’s expectations of future inflation (inflation expectations) have stabilised, while private sector wage pressures have moderated. There has also been a reduction in imported inflation due to declines in commodity prices and lower consumer price inflation in the economies of Jamaica’s main trading partners. Notably, despite the impact of adverse weather on agricultural supplies in the second half of 2024, which moved agricultural food prices upward, headline inflation reverted to target after a short breach of the upper bound in August 2024.
3. Over the next two years, inflation is likely to remain within the Bank’s target range, barring any new shocks. This projection largely reflects the Bank’s view that the main internal and external drivers of inflation in Jamaica will remain conducive to low, stable and predictable inflation.
4. However, upside risks to the inflation projection remain, particularly in the context of the uncertainties associated with potential changes in economic policies among Jamaica’s main trading partners. The United States (US) has announced trade policy adjustments, while several affected countries, including China and Canada, have announced retaliatory measures. These new trade policies could impact imported inflation for Jamaica. With this uncertain global economic outlook, the US Federal Reserve maintained its interest rate target at 4.25 per cent to 4.50 per cent in March 2025, a decision that also informed the MPC’s deliberations.
5. Against the background of these developments, the MPC determined that, in these circumstances, its policy stance continues to be appropriate to support the current outlook for inflation remaining within the target range over the next two years. The Committee, therefore, unanimously agreed to (i) hold the policy rate at 6.00 per cent per annum and (ii) preserve relative stability in the foreign exchange market.
6. To reinforce the Bank’s monetary policy stance, the MPC also decided to lower the margin between the interest rate on the Bank’s Standing Liquidity Facility (SLF) and its policy rate. This lower margin reduces the interest rate at which commercial banks access short-term (overnight) liquidity from BOJ. Therefore, effective 28 March 2025, the SLF rate will be reduced to 7.00 per cent from 8.00 per cent per annum. Reducing the margin also facilitates more stability in short-term market interest rates around the policy rate, which will help strengthen Jamaica’s monetary transmission mechanism.

The following considerations also informed the MPC’s decisions:

7. The outlook for real economic activity for fiscal year (FY) 2024/25 and FY2025/26 is likely to be in line with the last forecast. Indicators suggest that the economy contracted in the December 2024 quarter, due in large part to the continued impact of adverse weather. The subsequent normalisation in economic activity will cause the real gross domestic product (GDP) to grow in FY2025/26.
8. In February 2025, headline inflation in the US decelerated to 2.8 per cent from 3.0 per cent in January 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 December 2024 quarter, US GDP increased by 2.3 per cent, below projection, due to a contraction in investment and exports.
9. The Fed maintained its monetary policy target for interest rates at 4.25 per cent to 4.50 per cent in January 2025. The Fed also communicated a message that the risks to achieving its employment and inflation goals are roughly in balance and that future monetary policy decisions will continue to assess incoming data carefully, the evolving outlook and the balance of risks. Further, the Fed also noted that the economic outlook is uncertain and inflation remains somewhat elevated.
10. The outturns for selected external indicators were mixed. Oil prices trended below the Bank’s projections, while grains and US Liquefied Natural Gas (LNG) prices trended above predictions. The average of daily West Texas Intermediate (WTI) crude oil prices for January and February 2025 increased by 1.3 per cent, lower than the Bank’s forecast. Average grains prices (wheat, corn and soybean) increased month over month by 1.7 and 2.2 per cent in January and February 2025, respectively, compared with the Bank’s projection for marginal declines in both months. For LNG, average prices for January and February 2025 increased by 4.5 per cent, relative to a projected decline, reflecting an increase in export demand. International fertiliser prices, on average, increased by 10.3 per cent over January and February 2025.
11. In BOJ’s January 2025 survey of businesses’ inflation expectations, respondents’ expectations for inflation 12 months ahead were stable at 7.3 per cent relative to the previous survey. This latest outturn continues to confirm the stability in expectations since the middle of 2022. As indicated by the dollarisation ratio for deposits in commercial banks, expectations about exchange rate depreciation have also remained relatively stable.
12. The domestic banking system remains sound with adequate capital and liquidity.
13. The domestic fiscal policy stance continues to pose no risk to inflation over the near term.
14. The MPC reaffirmed its commitment to maintaining low and stable inflation and will deploy the tools necessary to preserve stability. The Committee agreed to maintain its current monetary policy stance until the above-noted uncertainties subside. The MPC is, however, prepared to adjust this stance if these uncertainties or any other risks materialise and result in an upward deviation of inflation from the target.

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Chairman of the MPC
27 March 2025