Bank of Jamaica Maintains Policy Rate at 5.50% Amid Continuing Global Uncertainty

• During its meetings on 25 and 26 June 2026, the Monetary Policy Committee (MPC) kept the policy interest rate at 5.50% and decided to continue measures to maintain stability in the foreign exchange market. The decision reflects the Bank of Jamaica’s (BOJ’s) view that, despite inflation remaining within its 4.0%–6.0% target range over the past three months, uncertainty remains high and maintaining current policy will help limit second-round inflationary effects from rising international commodity prices.
• Headline inflation rose to 5.5% in May 2026, remaining within the Bank's target range but exceeding its latest forecast. This marked the fourth consecutive monthly increase in 2026, driven mainly by higher prices for agricultural products and the pass-through of increased international commodity prices to domestic goods and services.
• Meanwhile, core inflation increased to 4.7% in May 2026, up from 3.9% in January, indicating that inflationary pressures are becoming more widespread beyond food and fuel. The increase reflects the impact of higher imported commodity costs filtering through the economy, suggesting that businesses are passing increased costs on to consumers
• Overall, headline inflation is projected to briefly rise above the 6.0% upper limit of the target range in the near term, although the breach is expected to be smaller than previously anticipated. Higher energy and transport costs, recent increases in public passenger fares, and stronger domestic demand linked to post-Hurricane Melissa recovery spending are expected to contribute to this temporary rise.
• Economic recovery continues but faces significant risks. The economy is gradually recovering following Hurricane Melissa, with GDP growth projected between 1.0% and 3.0% for FY2026/27. However, the outlook remains vulnerable to a prolonged Middle East conflict, which could raise airline fares and weaken tourism demand; a slower-than-expected recovery in the mining sector; tighter financial conditions in the United States; and reduced consumer purchasing power as inflation rises.
• The risks of inflation over the next eight quarters remain skewed to the upside, with the greatest threat being a prolonged Middle East conflict that could trigger further increases in global commodity prices. Despite these risks, Jamaica's external buffers remain robust. As at May 2026, Net International Reserves (NIR) stood at US$6.48Bn, equivalent to 26.6 weeks of goods and services import cover, more than double the accepted benchmark of 12 weeks. This strong reserve position has helped underpin exchange rate stability, with the Jamaican dollar appreciating modestly against the U.S. dollar year to date. The MPC reaffirmed that it will continue monitoring economic conditions closely and stands ready to adjust monetary policy if inflationary pressures intensify.

(Sources: Bank of Jamaica)