The Bank of Jamaica (BOJ) announced today that it will keep its benchmark rate unchanged at 6.0 per cent for the month amid global uncertainty.
The move was somewhat expected as the US Federal Reserve (Fed) kept rates stable in late January.
The policy rate is the benchmark interest rate set by the BOJ that influences the cost of borrowing in the Jamaican economy.
“At the global level, the Fed has paused its monetary loosening and US long-term external bond yields are rising,” said the BOJ in its release on Thursday. “Considering the domestic and global economic dynamics, the MPC (Monetary Policy Committee) determined that the current policy rate continues to be appropriate to support inflation remaining within the target range.”
Benchmark rates dipped by 100 basis points since August in four consecutive cuts from 7.0 to 6.0 per cent.
The decision was unanimously made by the BOJ’s MPC during meetings held on February 18 and 19. It reflects “increased uncertainty relating to the economic policies of Jamaica’s main trading partner,” stated the BOJ.
The Statistical Institute of Jamaica, reported that annual headline inflation at January 2025 was 4.7 per cent, representing a general trend reduction from 7.4 per cent at January 2024.
The BOJ highlighted that "domestic inflation is projected to remain within the Bank’s target range of 4.0 to 6.0 per cent over the next eight quarters" signaling confidence in the stability of key macroeconomic indicators.
"The exchange rate has been fairly stable, and the private sector’s expectations of future inflation have stabilised,” stated the BOJ.
This stability, coupled with high employment levels and moderating wage pressures, has provided a foundation for cautious optimism. Additionally, real GDP is expected to recover in 2025 after a contraction in late 2024, supported by improvements in the current account balance and healthy international reserves. The BOJ acknowledged external risks to its inflation forecast, particularly from US threats of new tariffs.
“Uncertainty related to potential economic policy changes in the US could have adverse implications for inflows through the current account of Jamaica’s balance of payments, as well as inflation expectations,” stated the BOJ.
Local threats to inflation include worse-than-anticipated weather conditions in Jamaica. On the downside, lower inflation or deflation could arise as a result of a weakening economy.
“The MPC reaffirmed its commitment to maintaining low and stable inflation and will deploy all the necessary tools to preserve stability,” stated the report.
The decision comes a day after the Planning Institute of Jamaica disclosed that the local economy declined for a second consecutive quarter but insisted that the country was not in a recession.
Speaking at the agency’s quarterly press conference on Wednesday, Director General Dr Wayne Henry reported that Jamaica recorded a 1.8 per cent decline for the October to December quarter in 2024.
The PIOJ expects the economy to return to growth in the current January to March quarter.