BOJ Maintains Rate at 7% but Signals Gradual Easing of Monetary Stance

• At its meetings on 26 and 27 June 2024, the Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC) unanimously agreed to start a gradual easing of its monetary policy stance. However, the MPC decided to maintain the policy rate at 7.0% per annum, at this time, and to continue its proactive stance of preserving relative stability in the foreign exchange market. This marks a little over a year since the policy rate was initially raised to 7.0%, and comes after four consecutive months of decline in the point-to-point inflation rate.
• Jamaica’s headline inflation at May 2024 was 5.2%, representing the third consecutive month in which inflation fell within the Bank’s target range of 4%-6%. This outturn was also significantly lower than the Bank’s most recent forecast and was largely due to some containment in domestic demand, a stable exchange rate, and a decline in imported inflation.
• Additionally, inflation expectations have stabilised, and anecdotal information suggests that wage pressures have moderated. The MPC also noted the surplus on the current account of the balance of payments for the December 2023 quarter, as well as the positive outlook for the balance of payments over the next year. This surplus underpins the relatively strong flows in the foreign exchange market and the relative stability in the exchange rate.
• In this context, projected inflation will likely be revised downward and generally remain within the target range over the next two years, except for a few months in 2025, primarily attributed to agricultural price inflation, following sharp declines in March 2024.
• The MPC has assessed that the risks to the inflation outlook are balanced (which means that inflation is likely to be in line with projections). The Committee will continue to monitor upside risks to inflation, which could influence higher inflation in the future. These risks include rising international shipping costs and the possibility of worse-than-anticipated weather conditions due to the emerging La Niña weather phenomenon.
• Future monetary policy decisions will continue to depend on incoming data, which, if they indicate a sustained anchoring of inflation within the target range, could lead to further easing of monetary policy. The date of the next policy decision announcement is 20 August 2024.

(Source: BOJ)