Fitch Expects 75bps Cut by Bank of Jamaica in 2025

With inflation anchored within the Bank of Jamaica’s (BOJ’s) target range, Fitch Connect forecasts that the Central Bank will lower the policy rate by 75 basis points (bps) to 5.25% by December 2025. This reflects an upward revision from Fitch’s previous forecast of Jamaica’s policy rate ending 2025 at 4.50%.
This expectation for loosening monetary policy is supported by consistent decreases in private sector inflation expectations, projected declines in global oil and food prices, stable regulated price schemes, and moderating wage pressures against a soft-ish growth backdrop.
While Fitch expects a reduction in policy rates, the BOJ’s Monetary Policy Committee (MPC) is unlikely to rush this process due to U.S. economic policy uncertainty. Instead, rate reductions are expected to resume in Q3 2025 and Q4 2025.
Of note, the BOJ touted positive domestic inflationary developments in their February 2025 decision -where they held rates at 6.0%; however, the uncertainty surrounding the macroeconomic environment will likely elicit a more cautious monetary policy posture at the BOJ’s MPC meetings in Q2 2025. This cautious stance will also be supported by the vulnerability of Jamaica’s economy to an appreciating dollar and BOJ’s focus on maintaining foreign exchange stability.
That said, risks to Fitch’s forecast are tilted to the upside, with the possibility of a strong US dollar increasing imported inflation pressures and worse-than-expected weather conditions and storms resulting in supply-side inflationary risk. Should these risks materialise, the BOJ may opt to pursue a relatively tighter monetary policy stance to preserve the recent progress made toward achieving its mandate.
Downside risks to the forecast include weaker-than-expected demand, driving inflation lower than projected, with the potential for softer growth outcomes in the U.S. standing out as a key threat in this regard, given its close ties to Jamaica.

(Source: Fitch Connect)