The Bank of Jamaica (BOJ) has announced a reduction in its policy interest rate by 25 basis points to 6.50 per cent per annum, effective October 1, 2024. This marks the second consecutive rate cut, as the BOJ’s Monetary Policy Committee (MPC) opted for further monetary easing, citing a positive shift in inflationary trends.
As of August 2024, Jamaica’s annual headline inflation rate stood at 6.5 per cent, up from 5.1 per cent in July, according to data from the Statistical Institute of Jamaica (STATIN). This outcome aligns with the BOJ’s most recent forecast but remains above its target range of four to six per cent.
Despite the uptick in headline inflation, core inflation—which excludes volatile categories such as agricultural food and fuel—dropped to 4.3 per cent in August, continuing the underlying inflation reduction that began at the start of the year.
The BOJ has indicated that inflation expectations are on a steady downward trajectory, with the exchange rate remaining relatively stable. Consequently, the central bank anticipates inflation will return to its target range within the forecast horizon, barring the next two to three months.
The BOJ also acknowledged potential risks posed by the current active hurricane season. Specifically, Hurricane Beryl’s impact on agricultural supplies could be less severe than expected, and international commodity prices have continued to moderate. These factors could further temper inflationary pressures.
Additionally, the BOJ highlighted the lagged effects of its monetary policy actions over the past three years, which have helped dampen domestic demand and wage pressures. In July 2024, the net flow of new domestic currency loans to the private sector, adjusted for inflation, showed further moderation.
Looking ahead, the MPC emphasised that future rate adjustments will follow a gradual path and will depend on incoming economic data. The committee also reiterated its commitment to refining the BOJ’s monetary policy toolkit to enhance the effectiveness of monetary transmission in the Jamaican economy.
