Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC), during its meetings on March 25 and 26 deliberated on the bank’s monetary policy stance in the context of increased uncertainty relating to the economic policies of Jamaica’s main trading partners. 

The MPC determined that, in these circumstances, its policy stance continues to be appropriate to support the current outlook for inflation remaining within the target range over the next two years. The Committee, therefore, unanimously agreed to (i) hold the policy rate at 6.00 per cent per annum and (ii) preserve relative stability in the foreign exchange market.

To reinforce the bank’s monetary policy stance, the MPC also decided to lower the margin between the interest rate on the bank’s Standing Liquidity Facility (SLF) and its policy rate. 

This lower margin reduces the interest rate at which commercial banks access short-term (overnight) liquidity from BOJ. Therefore, effective 28 March 2025, the SLF rate will be reduced to 7.00 per cent from 8.00 per cent per annum. Reducing the margin also facilitates more stability in short-term market interest rates around the policy rate, which will help strengthen Jamaica’s monetary transmission mechanism.

The MPC noted that inflation has stabilised in the Bank’s target range. Annual headline inflation at February 2025, as reported by the Statistical Institute of Jamaica (STATIN), was 4.4 per cent, representing a trend reduction from 6.2 per cent at February 2024. Core inflation (which excludes the prices of agricultural food products and fuel from the consumer price index (CPI)) was 3.8 per cent at February 2025, representing the twentieth consecutive month that core inflation fell below 6.0 per cent.

The reduction in headline inflation primarily resulted from stability in several key drivers of inflation. The exchange rate has remained generally stable, given a surplus on Jamaica’s external accounts and BOJ’s monetary policy actions. Since 2024, the private sector’s expectations of future inflation (inflation expectations) have stabilised, while private sector wage pressures have moderated. There has also been a reduction in imported inflation due to declines in commodity prices and lower consumer price inflation in the economies of Jamaica’s main trading partners. Notably, despite the impact of adverse weather on agricultural supplies in the second half of 2024, which moved agricultural food prices upward, headline inflation reverted to target after a short breach of the upper bound in August 2024. 

Over the next two years, inflation is likely to remain within the Bank’s target range, barring any new shock. This projection largely reflects the Bank’s view that the main internal and external drivers of inflation in Jamaica will remain conducive to low, stable and predictable inflation.

However, upside risks to the inflation projection remain, particularly in the context of the uncertainties associated with potential changes in economic policies among Jamaica’s main trading partners. The United States (US) has announced trade policy adjustments, while several affected countries, including China and Canada, have announced retaliatory measures. These new trade policies could impact imported inflation for Jamaica. With this uncertain global economic outlook, the US Federal Reserve maintained its interest rate target at 4.25 per cent to 4.50 per cent in March 2025, a decision that also informed the MPC’s deliberations.

The MPC reaffirmed its commitment to maintaining low and stable inflation and will deploy the tools necessary to preserve stability. The Committee agreed to maintain its current monetary policy stance until the above-noted uncertainties subside. The MPC is, however, prepared to adjust this stance if these uncertainties or any other risks materialise and result in an upward deviation of inflation from the target.

A summary of the Monetary Policy Committee’s discussions, which influenced the monetary policy decision, has been published on the Bank’s website at https://boj.org.jm/core-functions/monetary-policy/policy-schedule/summary-of-decisions/.

The date of the next policy decision announcement is 20 May 2025.