Business leaders expect higher costs but stable currency after Hurricane Melissa

Jamaican businesses raised their inflation expectations in November 2025, reflecting concerns about the economic fallout from Hurricane Melissa and signalling higher anticipated costs across key inputs.

“The expected inflation 12 months ahead was 6.2 per cent,” according to the Bank of Jamaica’s (BOJ) latest Inflation Expectations Survey, conducted between October 6 and November 28 with 307 respondents.

The results were higher than the 5.8 per cent recorded in the September survey. Actual inflation to November stood at 4.4 per cent. The Statistical Institute of Jamaica undertakes the survey on the BOJ’s behalf, interviewing CEOs, managing directors, and financial controllers about the future movement of prices and business conditions. The upward shift highlights the extent to which businesses are bracing for price pressures in the wake of Melissa, which disrupted supply chains and fuel distribution across several parishes.

One-third of respondents identified stock replacement as the input most likely to see the highest price increase over the next 12 months, while a similar percentage cited utilities. Wages and salaries were expected to see the lowest increase, with only 6.5 per cent of respondents highlighting labour costs.

Exchange Rate and Interest Rate Expectations

Businesses also anticipated a modest depreciation of the Jamaican dollar in the near term, with a 1.0 per cent weakening expected in three months, 1.1 per cent in six months, and 1.7 per cent in 12 months. This reflects a slightly faster pace of decline, compared with the September survey.

Interest rate expectations also shifted upwards for savings. Respondents forecast the 90-day Treasury bill rate three months ahead at 6.1 per cent, above the November outturn of 5.1 per cent. In terms of borrowing costs, respondents expect the BOJ’s benchmark policy rate to largely remain unchanged. Currently, the benchmark policy rate stands at 5.75 per cent. It previously climbed from 0.5 per cent in late 2021 to a peak of 7.0 per cent in 2023, before easing to current levels. In general, higher rates are seen as a tool to curb inflation and uncertainty.

“The majority of respondents believe that the bank’s policy rate will remain the same over the next three months,” the BOJ report stated. Specifically, 55.4 per cent of respondents expected the benchmark rate to remain unchanged. However, the proportion anticipating a marginal increase rose to 20.5 per cent, up from 19.4 per cent in September. Among financial sector respondents, 25.9 per cent expected the policy rate to be marginally higher, reflecting growing concern about inflation risks.

Perceptions of Inflation Control and Business Conditions

Despite higher inflation expectations, the BOJ noted that “the perception of inflation control improved in the November survey”. However, sentiment on business conditions weakened. The Present Business Conditions Index fell to 110.5 from 112.4, while the Future Business Conditions Index dropped sharply to 97.8 from 135.2. The decline reflected more respondents expecting conditions to worsen in the year ahead, coupled with fewer anticipating improvements.

The November survey underscores the dual challenge facing policymakers--businesses are bracing for higher inflation and operating costs in the aftermath of Hurricane Melissa, while confidence in future business conditions has deteriorated.

business@gleanerjm.com