BOJ holds policy rate at 5.5 per cent

The Bank of Jamaica (BOJ) Monetary Policy Committee (MPC) has unanimously agreed to maintain the policy rate on overnight placements by deposit-taking institutions at 5.5 per cent per annum.

“The MPC also decided that Bank of Jamaica will continue special measures to preserve stability in the foreign exchange market, including directly supplying the foreign exchange needs of selected entities in the energy sector,” Governor, Richard Byles, informed.

He assured that the bank will continue to reinforce market confidence in the predictability of foreign exchange flows by maintaining the pre-announcement of the timing and size of BOJ Foreign Exchange Intervention and Trading Tool (B-FXITT) flash sale interventions.

Byles was speaking during the BOJ’s Quarterly Monetary Policy Press Conference at the Garden Hotel in Mandeville, Manchester, on Tuesday, May 26.

He explained that the decision to maintain the policy rate reflects the Bank’s assessment that the current stance remains appropriate to limit second-round effects from external price shocks and support inflation within the target range of four to six per cent over the medium term.

Headline inflation as of April 2026 stood at 4.3 per cent, remaining within the Bank’s target range and consistent with the March 2026 outturn.

Core inflation, which excludes agricultural food and fuel prices from the Consumer Price Index (CPI), edged up slightly to 4.1 per cent in April from four per cent in March.

Looking ahead, the Central Bank Governor noted that rising international oil prices are expected to exert upward pressure on electricity costs in Jamaica.

He pointed out that geopolitical tensions, particularly in the Middle East, have intensified significantly since the BOJ’s last press conference in February, disrupting shipping activity in the Strait of Hormuz – a critical route for global oil and gas shipments.

“Given the uncertainty surrounding the duration of the conflict and the extent of damage to the infrastructure, recovery could be slow and protracted,” Byles indicated.

He stated that, against this background, the global shock has heightened the risk of headline inflation rising above the 4.3 per cent recorded in April.

“Domestic gas prices have already risen and may accelerate further with implications for transport-related inflation. Beyond these direct effects, higher energy and transport costs are also expected to contribute to second-round increases in the prices of other goods and services across the economy,” Byles stated.

He noted that, as a result, inflation in Jamaica is projected to trend upwards over the June to September 2026 quarter, surpassing the Bank’s upper target limit of six per cent.

“The extent of the breach of the inflation target range will depend on the severity and duration of the Middle East conflict; those variables are highly uncertain. As geographical tensions ease and global oil supplies return to normal levels, headline inflation in Jamaica is forecast to gradually moderate and return to the target range,” Byles explained.

He pointed out that the projected moderation in inflation is expected to be partly offset by domestic demand pressures, driven primarily by fiscal spending to support rebuilding efforts following Hurricane Melissa.

The Central Bank Governor emphasised that inflation could rise higher than projected, with the main risk being an extended and broader conflict in the Middle East, which could drive further increases in international commodity prices and, in turn, impact domestic prices.

He said adverse weather conditions, including the effects of El Niño, could also exert upward pressure on agricultural prices.

“On the downside, the impact of those factors on prices could be tempered by reduced demand because of energy costs taking up a larger share of consumers’ disposable income,” Byles noted.

- JIS News

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