JAMAICA | Bank of Jamaica Reduces Policy Rate to 6.5%

KINGSTON,  Jamaica October 1, 2024 - Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC), at its meetings on 26 and 27 September 2024, decided to: (i) reduce the policy rate by 25 basis points (bps) to 6.50 per cent per annum, effective 01 October 2024, and manage domestic liquidity accordingly; and (ii) continue to take measures to preserve relative stability in the foreign exchange market. 

The decision of the MPC to loosen monetary policy further is based on an improvement in the inflation outlook.

Annual headline inflation at August 2024, as reported by the Statistical Institute of Jamaica (STATIN), was 6.5 per cent, higher than the 5.1 per cent at July 2024.

This outturn was in line with the most recent forecast and above the Bank’s target range of 4.0 to 6.0 per cent.Despite the increase in headline inflation, the measure of core inflation that excludes the prices of agricultural food products and fuel was 4.3 per cent at August 2024, continuing the lowering of underlying inflation since the start of 2024.

The Bank’s projected path for inflation over the next eight quarters is likely to be revised downward. Recent developments suggest that headline inflation will return to the Bank’s target range earlier than initially forecast.

This outlook largely reflects the possibility of a lower-than-anticipated impact of Hurricane Beryl on agricultural supplies. Additionally, some key drivers of headline inflation continued to moderate in the context of falling international commodity prices.

The lagged effect of the Bank’s monetary policy posture over the past three years should also continue to dampen domestic demand and wage pressures.

The net flow of new domestic currency loans to the private sector (expressed in constant prices) for July 2024 also continued to moderate. Inflation expectations in Jamaica have been on a consistent downward path and the exchange rate has been relatively stable.

In this regard, inflation is expected to settle within the Bank’s target range over the forecast horizon, with the exception of the next two to three months. There is, however, an ongoing upside risk to the inflation projection in the context of the current active hurricane season.

The MPC highlighted that the glide path for future interest rate adjustments will be gradual but will continue to depend on the incoming data.

The MPC reiterated its commitment to the ongoing review of its monetary policy toolkit to foster improvements in the monetary transmission mechanism.

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