Fitch Expects More Bank of Jamaica Rate Cuts in 2025

Fitch anticipates that the BOJ will reduce rates by another 25bps to 5.50% on June 20, 2025. It further expects that the BOJ will lower the policy rate by an additional 75bps to 5.00% by December 2025.
These expectations are based on increased clarity on the impacts of trade policy for domestic price stability and a favourable inflationary outlook.
While uncertainty continues to dominate the international economic landscape, the BOJ’s statement on the limited first-round impacts of tariffs is a strong indicator of the bank’s potentially dovish posture in the near term.
With inflation anchored near the midpoint of its target range¹, private sector inflation expectations stable at 7.3% in March 2025, lower projected energy prices, and wage pressures moderating against a soft growth backdrop, inflation is expected to ease to 4.5% by the end of 2025 and average 5.0% for the calendar year 2025 – the midpoint of the BOJ’s target range.
That said, risks to the inflation and interest rate forecasts are balanced, with the possibility of geopolitical tensions creating supply chain challenges and subsequent price pressures. Additionally, significant weather-related shocks could create supply-side inflationary pressures. Should these risks materialise, the BOJ may opt to pursue a tighter-than-expected monetary policy stance.
Conversely, downside risk from sluggish growth numbers and flagging external demand could incentivise the BOJ to pursue more expansionary monetary policy through the end of 2025, should it feel confident that it could satisfy its price stability mandate.

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¹Headline inflation was at 5.3% year over year (YoY) in April, and core inflation has now held below the 6.0% threshold for 22 consecutive months.

(Source: Fitch Connect)