The Bank of Jamaica says it is maintaining its policy rate at 5.5 per cent amid continuing global uncertainty.

The Bank’s Monetary Policy Committee (MPC), which met last Thursday and Friday, says that while inflation has remained within the Bank’s inflation target range of 4 to 6 per cent over the last three months, the inflation outlook remains uncertain.

The Committee assessed that the risks to inflation from geopolitical tensions, while moderating, remain elevated, with inflation projected to temporarily breach the upper limit of the target range in the near term.

As a result, the MPC determined that maintaining the current monetary policy stance is appropriate to limit later or second-round price increases resulting from the recent increases in international commodity prices.

The Committee unanimously decided to maintain the policy rate, that is, the rate offered to deposit-taking institutions on their current account balances at BOJ at 5.5 per cent per year and continue measures to preserve relative stability in the foreign exchange market.

The Central Bank says the environment underpinning the inflation outlook for Jamaica remains uncertain, as while there are discussions to end hostilities in the Middle East, a final resolution has not yet been achieved.

It adds that international commodity prices are generally falling but remain elevated and volatile. At the same time, financial conditions in the United States appear to be tightening as a result of higher inflation in that jurisdiction.

Selected indicators point to improving demand conditions in Jamaica in the context of a gradual post-Hurricane Melissa recovery. However, the risks to the growth outlook are skewed to the downside.

According to the Committee, a prolonged Middle East conflict could adversely affect the services industries, particularly tourism, through higher airline fares and weaker travel demand. In addition, a slower-than-expected restoration of mining activities following Hurricane Melissa and weaker consumer purchasing power associated with the rise in inflation could also dampen demand and moderate price pressures.

Headline inflation, in this context, is projected to continue rising from 5.5 per cent at May 2026 and temporarily breach the upper limit of the target range in the near term.

Core inflation is also expected to trend above the Bank’s target range over this period

BOJ says the risks to inflation over the next eight quarters are skewed to the upside (which means that inflation could be higher than projected). The main upside risk is a more extended and broader conflict in the Middle East, resulting in further increases in international commodity prices and their subsequent impact on domestic prices.

The Committee says it will continue to focus on its inflation-control mandate.

In the context of continued uncertainty, the Committee will closely monitor the incoming data and assess the implications for inflation and inflation expectations. The MPC says it is prepared to adjust its monetary policy stance if upside risks to inflation materialise.