Bank of Jamaica Holds the Policy Rate at 5.75%

  • At its 18–19 August 2025 meetings, the MPC unanimously agreed to hold the policy rate at 5.75% against the background of low domestic inflation amid global uncertainties. The MPC determined that the current stance remains appropriate to anchor inflation within the 4–6% target over the next two years despite global uncertainties and inflation being below the lower bound of its target range for the last two consecutive months.
  • Headline inflation stood at 3.3% in July 2025, down from 5.1% the prior year and below the BOJ’s 4–6% target range. This moderation reflected lower crude oil prices, non-repetition of transport fare hikes, reduced GCT on electricity, improved agricultural supplies, and stable inflation expectations. Importantly, core inflation was 4.3%.
  • BOJ projects inflation to generally trend within the 4–6% band over the next two years, though near-term readings are expected to remain below the lower bound due to cheaper electricity and stronger agricultural output, before gradually rising toward the midpoint. These projected breaches mainly reflect the temporary impact of improved agricultural supplies, following the shock to the Agriculture sector in 2024, as well as lower electricity costs in the context of the reduction in the GCT on electricity charges.
  • That said, risks to the inflation forecast for Jamaica are skewed to the upside, which means that inflation could be moderately higher-than-projected. Higher inflation could stem from a sharper-than-anticipated increase in tariffs faced by the US trading partners, resulting in higher imported inflation and inflation expectations. In addition, inflation could be higher-than-projected if there is a further escalation in geopolitical tensions, which could negatively impact international supply chains. Lower inflation could, however, result from lower-than-projected international commodity prices as well as weaker demand conditions.
  • Still, the MPC reaffirms its commitment to maintaining low and stable inflation and will deploy the tools necessary to preserve price and foreign exchange market stability.
  • On the economic front, despite shifts in US policy, Jamaica’s economy has remained resilient, underpinned by rising remittances in May 2025, higher tourism arrivals in Q2 2025, a current account surplus, and record international reserves of US$6.1Bn. Employment levels are also near record highs and wage pressures are showing signs of moderation.
  • According to the BOJ, GDP is projected to grow 1.0–3.0% in FY2025/26, supported by Agriculture, Mining, and Tourism, before normalising to 1.0–2.0% annually in subsequent years as growth stabilises. This economic outlook; however, continues to be clouded by the uncertainties in the global environment. The US continues to reset its economic relationships with its trading partners and tighten its immigration policies. These developments may slow the pace of economic activity and could stimulate inflationary pressures in the US.
    (Source: Bank of Jamaica)