JAMAICA | Bank of Jamaica Holds Firm on Policy Rate Amid Global Trade Tensions

KINGSTON,  Jamaica March 27, 2025 - In a calculated move that signals confidence despite looming international economic uncertainties, the Bank of Jamaica (BOJ) has maintained its policy interest rate at 6.00 percent while simultaneously easing overnight lending costs for commercial banks.

The decision, reached unanimously by the BOJ's Monetary Policy Committee (MPC) during deliberations on March 25-26, comes as Jamaica navigates the choppy waters of potential trade policy shifts among its major trading partners, including the United States.

"The current policy stance continues to be appropriate to support the outlook for inflation remaining within target over the next two years," the Committee affirmed, while taking steps to strengthen Jamaica's monetary transmission mechanism through a reduction in its Standing Liquidity Facility (SLF) rate.

Effective March 28, the SLF rate will drop to 7.00 percent from 8.00 percent per annum, narrowing the margin between this overnight lending facility and the policy rate. This adjustment aims to foster greater stability in short-term market interest rates around the policy benchmark.

The move comes against a backdrop of stabilizing inflation, which has settled comfortably within the Bank's target range. February's headline inflation stood at 4.4 percent, marking a significant improvement from the 6.2 percent recorded in February 2024. Core inflation, which excludes volatile agricultural food products and fuel prices, registered at 3.8 percent—the twentieth consecutive month below the 6.0 percent threshold.

This inflation moderation has been driven by several key factors: a generally stable exchange rate supported by Jamaica's external account surplus and the BOJ's monetary policy interventions; stabilized private sector inflation expectations; moderated wage pressures; and reduced imported inflation resulting from declining global commodity prices and lower inflation in Jamaica's main trading partner economies.

The BOJ projects inflation will remain within target over the next two years, barring unforeseen shocks. However, the Bank acknowledges significant upside risks, particularly related to emerging trade tensions. The United States has recently announced trade policy adjustments, triggering retaliatory measures from China and Canada—developments that could potentially impact Jamaica's imported inflation.

Against this uncertain global economic landscape, the U.S. Federal Reserve maintained its interest rate target at 4.25-4.50 percent in March 2025, a decision that factored into the MPC's deliberations.

The Committee has pledged to maintain its current monetary policy stance until these uncertainties subside, while standing ready to pivot should inflation risks materialize. The next policy decision is scheduled for May 20, 2025.

The BOJ's deft balancing act comes as United States Secretary of State Marco Rubio has committed to reviewing the U.S. Travel advisory against Jamaica, signaling potential improvements in U.S.-Jamaica cooperation that could further stabilize the island nation's economic outlook.