BOJ lowers policy rate to 5.75 per cent

The Bank of Jamaica (BOJ) has lowered its policy rate from 6 per cent to 5.75 per cent per annum, effective Wednesday.

In a media release on Tuesday, the BOJ said its Monetary Policy Committee, during its recent meeting, unanimously agreed to make the adjustment based on the fact that inflation continues to track within the Bank’s target range of 4.0 to 6.0 per cent, having done so since September 2024.

"Notably, the inflation outlook remains favourable," the BOJ said, pointing out that annual headline inflation at April 2025, as reported by the Statistical Institute of Jamaica (STATIN), was 5.3 per cent, in line with the outturn for April 2024.

"The stable and relatively low headline inflation outturn primarily reflected the non-recurrence of price increases for regulated items (such as bus and taxi fares), which offset higher food inflation. Moreover, the exchange rate, imported inflation, and the private sector’s expectations of future inflation (inflation expectations) have been fairly stable," the BOJ said.

It is projecting that inflation will remain within the target range over the next two years.

"Following the effects of recent shocks, the real economy is forecast to reflect moderate improvements. Real gross domestic product (GDP) is projected to recover in 2025, largely due to normalisation in the mining, tourism, and construction sectors. In this context, employment levels remain high, even as anecdotal data suggest that wage pressures are moderating. The current account of Jamaica’s balance of payments is projected to remain in surplus over the near term and the international reserves are healthy and projected to improve further," it stated.

In the meantime, the BOJ said there continues to be some uncertainty about the rapidly evolving policies in the United States (US) and the global economy, and added that these issues have implications for the domestic economic outlook.

However, it said given the available information, it projects that the first-round impact of the increase in US tariffs on prices in Jamaica will not be significant.

There may also be some impact of these policies on Jamaica’s GDP growth and the external accounts, it added.

"The risks to the inflation forecast are nonetheless skewed to the upside, which means that inflation could be higher than projected, albeit moderately. Higher inflation could stem from a sharper-than-anticipated increase in the tariff faced by the trading partners of the US as imported inflation and inflation expectations rise. In addition, inflation could be higher than projected if there is a further escalation in geopolitical tensions, which could negatively impact international supply chains. Lower inflation could, however, result from lower-than-projected international commodity prices as well as weaker demand conditions," the BOJ said.

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