Bank of Jamaica Maintains Policy Interest Rate at 5.75% Amidst Elevated Hurricane-Related Inflation Risks

BOJ Holds Policy Rate Steady

The Bank of Jamaica's (BOJ) Monetary Policy Committee (MPC) unanimously decided to maintain the policy interest rate at 5.75% per annum. This decision was reached following meetings held on December 16 and 17, 2025, and was announced on December 19, 2025. The central bank cited higher hurricane-related inflation risks as the primary factor influencing its decision.

Hurricane Melissa's Devastating Economic Impact

The MPC expressed significant concern regarding the economic fallout from Hurricane Melissa, which struck Jamaica on October 28, 2025. Initial assessments indicated that the hurricane's impact was 'more pronounced than initially anticipated'. Updated estimates reveal that damage to infrastructure, including roads, buildings, and the electricity grid, now exceeds 40% of the Gross Domestic Product (GDP), a rise from a previous estimate of 30%. The critical agriculture sector suffered extensive damage, amounting to approximately 50% of its 2024 GDP.

This widespread destruction is directly contributing to increased prices for consumers. Annual headline inflation rose to 4.4% in November 2025, up from 2.9% in October, surpassing the bank's earlier forecasts.

Inflation Outlook and Central Bank's Stance

The BOJ projects that annual headline inflation will 'rise sharply' over the coming months and is expected to breach the bank's target range of 4.0% to 6.0% by early 2026. Of particular concern to policymakers is the trajectory of core inflation, which excludes volatile food and fuel prices. Core inflation also increased to 4.3% in November, signaling that price pressures are spreading beyond the immediate shock of the hurricane. The MPC warned of 'second-round effects', where initial surges in essential goods like food and energy can lead to broader price increases across other goods and services.

In response, the BOJ is prepared to adjust its monetary policy stance and take necessary actions if these risks threaten the projected return of inflation to the target range. Alongside holding the policy rate steady, the central bank has initiated special pre-emptive measures to maintain stability in the foreign exchange market, including the sale of US$210 million into the market.

Economic Projections and Government Response

The near-term economic outlook for Jamaica is challenging. The BOJ forecasts a significant contraction in real GDP, projecting a decline between 4% and 6% for the fiscal year 2025/26, primarily due to extensive damage to infrastructure and disruptions to productive capacity.

In support of recovery and relief efforts, the Jamaican Parliament has temporarily suspended the fiscal rule for an initial period of one year. This measure aims to facilitate increased public sector spending for reconstruction.