23.02.202621:41:32UTC+00Jamaica Reduces Rate to 5.5%

The Bank of Jamaica lowered its policy rate to 5.50% at its February meeting, after the direct inflationary impact of Hurricane Melissa turned out to be less severe than initially expected. The central bank highlighted that a faster-than-anticipated recovery in agricultural supplies, together with a recent appreciation of the exchange rate, helped bring annual inflation down to 3.9% in January. In addition, the easing of second-round price effects has accelerated the projected return of inflation to the 4–6% target range.

Although temporary breaches of the target range are still possible around mid-2026, lower inflation expectations and stable core inflation have reduced the risk that price pressures will persist. At the same time, the post-hurricane recovery and higher fiscal spending continue to pose upside risks to inflation. Nevertheless, the country’s international reserves remain strong and are expected to improve further.

Economic activity is forecast to contract by 1.0–3.0% in fiscal year 2025/26 before recovering in 2026/27. The Bank of Jamaica emphasized that it remains prepared to adjust its policy stance if necessary.