BOJ Cut Policy Rate by 25bps

  • Following its Monetary Policy Committee (MPC) meetings on May 16 and 19, 2025, the Bank of Jamaica (BOJ) announced a 25 basis points cut to the policy rate to 5.75%. This cut follows two rate pauses at 6.0% in February and March of 2025. The BOJ’s rate cut decision was influenced by a favourable inflation outlook and expectations of moderate improvements in the economy.
  • The BOJ’s decision incorporated the fact that annual headline inflation for April 2025 of 5.3%1 was in line with the outturn for April 2024. The stable and relatively low inflation primarily reflected the non-recurrence of price increases for regulated items (such as bus and taxi fares), which offset higher food inflation. Importantly, core inflation, which excludes the volatile prices of agricultural food products and fuel, was 4.4%, remaining below the upper limit of the 4.0% to 6.0% target since July 2023.  Moreover, the exchange rate, imported inflation, and the private sector’s expectations of future inflation have been fairly stable.
  • On the economic front, the BOJ forecasted moderate improvements to the real economy “following the effects of recent shocks”. Real gross domestic product (GDP) is projected to recover in 2025, largely due to normalisation in the mining, tourism, and construction sectors. In this context, employment levels remain high, even as anecdotal data suggest that wage pressures are moderating. The central bank also noted that the current account of Jamaica’s balance of payments is projected to remain in surplus over the near term, and that international reserves are healthy and projected to improve further.
  • Notwithstanding the positive inflation and economic signs, the central bank noted that inflation could exceed projections if geopolitical tensions escalate further, potentially disrupting international supply chains. Conversely, inflation may fall below expectations if international commodity prices decline more than anticipated or if demand conditions weaken. At the same time, the central bank highlighted uncertainty from the fast-evolving policies in the United States (US) and the global economy, and their potential implications for the domestic economic outlook.
  • That said, the MPC communicated that it would be prepared to adjust the stance of monetary policy if the above-noted risks crystallise and result in an upward deviation from the inflation target.

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1According to the Statistical Institute of Jamaica (STATIN)

(Sources: BOJ & NCBCM Research)