BOJ holds rates steady amid Hurricane Melissa fallout, expects inflation to return to normal by 2027

The Bank of Jamaica (BOJ) has opted to keep its policy rate unchanged at 5.75 per cent per annum, amid mounting inflation pressures following the passage of Hurricane Melissa.

The decision was taken during meetings of the Monetary Policy Committee (MPC) on November 20 and 21. The MPC is comprised of the BOJ Governor, three officials, and two appointed members.

In a media release Monday, the MPC acknowledged the “considerable hardship and dislocation being suffered by many Jamaicans” and explained that stability was critical to Jamaica’s recovery.

“The MPC determined that preserving a stable macroeconomic environment is essential to the recovery effort at the individual, household and national levels,” stated the MPC.

Hurricane Melissa hit the island on October 28 and caused over US$8 billion in damage.

Inflation stood at 2.9 per cent in October 2025, and is expected to rise sharply above the BOJ’s target range of 4–6 per cent in the near term. The central bank attributed this to damage in major food-producing parishes and knock-on effects on transport, energy, and household costs. “Core inflation… will also rise, breaching the target range in mid-2026,” the MPC warned.

The government has signalled a temporary suspension of fiscal rules to support relief and reconstruction, which will increase spending and add to inflation risks. The BOJ cautioned that “higher inflation” could result from higher-than-expected domestic demand to support reconstruction efforts, as well as higher-than-anticipated inflation expectations.

To bolster stability, the BOJ has taken special pre-emptive measures in the foreign exchange market, selling US$210 million since the hurricane’s passage.

It will also provide foreign currency liquidity directly to selected energy sector entities and reintroduce scheduled intervention sales.

“Holding the policy rate unchanged, complemented by proactive measures to ensure stability in the foreign exchange market, will enable inflation to return to the target range by early 2027,” the MPC said.

- Steven Jackson

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