Financial institution of Jamaica held its key coverage charge regular at six per cent till March 27, 2025.
Financial institution of Jamaica (BOJ) introduced on Thursday it will preserve its benchmark rate of interest at 6 per cent, placing a cautious steadiness between supporting financial restoration and guarding in opposition to inflationary dangers posed by international uncertainties and home local weather vulnerabilities.
The choice, unanimously agreed on by the central financial institution’s financial coverage committee (MPC), marks a shift from the central financial institution’s 4 consecutive charge cuts in late 2024. Charges had been trimmed by 100 foundation factors between August and December 2024. This follows inflation cooling from 7.4 per cent in January 2024 to 4.7 per cent in January 2025.
“The present coverage charge continues to be acceptable to assist inflation remaining throughout the goal vary and preserve relative stability within the international alternate market,” the MPC mentioned in its assertion, emphasising that dangers to the inflation outlook stay “skewed to the upside”.
The BOJ attributed this sustained disinflation to cheaper price will increase in regulated sectors — notably public transportation — and stabilising public expectations of future value rises. Core inflation, which excludes risky meals and power prices, held regular at 4 per cent, marking 19 consecutive months throughout the central financial institution’s 4-6 per cent goal band. The central financial institution mentioned it expects inflation to stay within the 4 per cent to six per cent vary at the very least for the subsequent two years, although it identified that numerous developments might push value will increase greater.
Nonetheless, the MPC famous that inflation expectations amongst companies have continued trending downward. Enterprise surveys in December 2024 confirmed 12-month-ahead inflation expectations falling to 7.2 per cent from 8.3 per cent beforehand, signalling rising confidence within the BOJ’s coverage framework.
Jamaica’s financial system is forecast to contract by an estimated 1.5 to 0.5 per cent within the 2024/25 fiscal 12 months, largely resulting from Hurricane Beryl’s devastation of crucial infrastructure and agricultural output in late 2024. Nevertheless, the MPC projected a rebound to 1.0-3.0 per cent development in 2025/26, pushed by recoveries in tourism, utilities, and farming.
But, the BOJ has is eyes on dangers to that forecast, particularly from altering insurance policies in america.
“Uncertainty associated to potential financial coverage modifications within the US might have opposed implications for inflows by way of the present account of Jamaica’s steadiness of funds, in addition to inflation expectations,” the BOJ famous.
The opportunity of common tariffs or particular tariffs focusing on international locations like China might disrupt international commerce dynamics, not directly impacting Jamaica by lowering demand for its exports or growing import prices.
The BOJ additionally identified that worse-than-anticipated climate circumstances in Jamaica might additionally put upward strain on inflation.
“On the draw back, decrease inflation might end result from weaker-than-projected demand,” it mentioned.
It additionally highlighted rising international dangers, notably the US Federal Reserve’s pause in financial easing. Whereas the Fed held charges at 4.25-4.50 per cent in January 2025, yields on long-term US Treasury bonds climbed from 3.7 per cent to 4.4 per cent between September and December 2024, elevating issues about capital flight from rising markets like Jamaica.
Within the meantime, commodity markets provided blended alerts: international grain costs fell 15.1 per cent year-on-year in late 2024, whereas oil costs dipped modestly. Nevertheless, hovering transport prices and lingering provide chain disruptions tempered features. The BOJ forecast annual declines of 5.9 per cent for grains and 0.5 per cent for oil over the close to time period, assuming no main geopolitical or local weather shocks.
Jamaica’s international alternate market remained secure, with the dollarisation ratio — a measure of public confidence within the native forex — holding regular. Worldwide reserves stayed sturdy at US$5.5 billion in January, buoyed by a present account surplus, although the MPC pledged continued interventions to curb extreme forex volatility.
Fiscal settings had been deemed “impartial” for inflation, with public debt dynamics below management. Nevertheless, restricted authorities spending flexibility raises reliance on financial coverage to buffer exterior shocks, the committee famous. Excessive climate emerged as a recurring theme within the BOJ’s danger evaluation.
Nonetheless, the BOJ reiterated its readiness to tighten coverage if inflation dangers materialise, emphasising data-dependent decision-making.
“The MPC reaffirmed its dedication to sustaining low and secure inflation and can deploy all the required instruments to protect stability. The committee agreed that it will be ready to regulate the stance of financial coverage if the above-noted dangers crystallise and lead to an upward deviation from the inflation goal.”The central financial institution will give extra particulars on its motion at a press briefing scheduled for Monday, after which it is going to flip its consideration to the MPC’s March 27 assembly, which can incorporate up to date GDP figures and international commodity value developments.
