BOJ Holds Policy Rate at 5.50% in August as Inflation Risks Remain Elevated

• The Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC) unanimously decided to maintain the policy rate at 5.50% at its August 14 and 17, 2026 meetings and continue measures to preserve relative stability in the foreign exchange (FX) market. The decision reflects rising inflationary pressures and the uncertainty from the unresolved Middle East conflict and intensifying Russia-Ukraine war, which have kept international commodity prices, particularly crude oil, elevated.
• Headline inflation accelerated to 7.5% in July 2026, up from 6.7% in June and 3.3% a year earlier. It marks the second consecutive month above the upper end of the BOJ’s 4.0%–6.0% target range but comes below the Central Bank’s projections. July’s core inflation^[1] outturn was 5.2%, above the 5.0% recorded for June 2026 and the 4.3% recorded for July 2025.
• The MPC expects headline inflation to remain above the 6.0% ceiling during the September 2026 quarter before moderating towards the target range. Higher international energy and transportation costs, stronger domestic demand associated with post-Hurricane Melissa reconstruction spending, and rising agricultural prices are expected to maintain upward pressure on inflation in the near term. However, the relatively stable FX rate, which ranged between J$159.7589 and J$156.7435, is expected to continue to limit the extent to which higher international prices are transmitted to domestic consumers.
• That said, inflation risks remain firmly skewed to the upside, with the outlook particularly vulnerable to further escalation or prolongation of geopolitical conflicts. Higher global oil prices could feed through to electricity, transportation and other goods and services, while worsening drought and heat conditions could put upward pressure on agricultural prices and create additional second-round inflationary pressures. The MPC also flagged stronger-than-expected domestic spending as an upside risk, although weaker consumer purchasing power could provide some offset by constraining demand.
• With risks over the next eight quarters skewed to the upside, the MPC reiterated that it will closely monitor incoming data and remains prepared to tighten policy if inflationary pressures become more persistent. However, Jamaica’s healthy international reserves at J$6.64Bn as at July 2026 (+2.3% month on month) and stable FX rate continue to provide an important buffer against external shocks, providing the BOJ with some capacity to assess the current inflation spike before adjusting its policy stance.

(Sources: BOJ & NCBCM Research)

 

^[1] Strips out the prices of agricultural food products and fuel.