Fitch Weighs in on Jamaica’s Inflation and Interest Rate Outlook

• Food prices growth could, at a minimum, exceed 10% in Jamaica over the next year, according to a December 3 report by Fitch. The agency’s forecast is within the context of the scale of the damage from Melissa.
• Fitch also noted that as Jamaica embarks on its long economic recovery, it expects that the Bank of Jamaica (BOJ) will maintain the policy rate at 5.75% through year-end 2025 and into H1 2026 as real interest rates turn negative¹. It noted that while real rates will turn negative – making policy very loose – the BoJ’s credible inflation-targeting regime and well-anchored inflation expectations will give it space to navigate the temporary supply shock.
• “Indeed, the BoJ’s interventions in the foreign exchange market to keep the exchange rate steady and ensure the affordability of imports will be a primary tool to limit inflationary pressures. With the Bank of Jamaica explicitly stating that the domestic fiscal policy stance poses inflationary risk in the near term, we expect that the vast majority of the needed post-Hurricane economic stimulus will come through fiscal channels rather than monetary policy easing”, the report noted. However, as the recovery progresses and price pressures moderate slightly, it also sees room for a 25bp cut in Q4 2026 to support domestic demand, lowering the rate from 5.75% to 5.50%.
• Still, the report cited that risks to Jamaica’s inflation and interest rate outlook are heightened and skewed to the upside. Given the unprecedented nature of Hurricane Melissa and the severe destruction wrought to the country’s productive assets and infrastructure, inflation could remain elevated for a longer period and at a higher level. This, in turn, could prompt the central bank to leave the interest rate unchanged, or even increase the policy rate to counteract domestic price pressures.
• Further, despite efforts to support the currency and reduce imported inflation, unexpected fluctuations in global energy and commodity prices could quickly feed into Jamaica’s inflation picture, given the increased reliance that Jamaica’s beleaguered economy will have on imported goods during hurricane recovery.

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¹When prices (inflation) are rising faster than the interest rate offered by banks or the central bank's policy rate, the real rate becomes negative. This means that money saved loses purchasing power over time, effectively encouraging spending and borrowing.

(Source: BMI, a Fitch Solutions Company)