The Bank of Jamaica’s Monetary Policy Committee (MPC) has decided to maintain the benchmark Jamaica Policy Rate at 5.75 per cent. This decision, announced following the MPC’s meetings on November 20-21, 2025, comes as the nation grapples with the immediate inflationary impact of Hurricane Melissa and the crucial need to preserve macroeconomic stability for Jamaica.
Jamaica Policy Rate Decision Amidst Storm Recovery
The Bank of Jamaica (BOJ) has opted to hold its policy rate steady at 5.75 per cent, a level it has maintained since a reduction in May 2025. This strategic pause underscores the central bank’s commitment to navigating the economic fallout from Hurricane Melissa, a Category 5 storm that struck the island on October 28, 2025. The MPC’s unanimous decision reflects a cautious approach to the Jamaica Policy Rate, prioritizing price stability in the face of significant disruptions and escalating inflation forecasts.
Hurricane Melissa’s Broad Economic Impact on Jamaica
Hurricane Melissa has inflicted considerable damage across Jamaica, leading to projections of a significant contraction in economic activity in the short term. Initial estimates suggest national losses could be as high as 30 per cent of the country’s Gross Domestic Product (GDP), with some analyses estimating economic losses exceeding US$20 billion, equivalent to Jamaica’s entire annual GDP for 2024. The World Bank estimates physical damage alone at US$8.8 billion, or 41 per cent of the 2024 GDP, making it the costliest hurricane in Jamaica’s recorded history. Key sectors such as tourism and agriculture have been directly impacted, and infrastructure damage is extensive, disrupting productive activities and livelihoods. The hurricane economic impact is substantial.
Inflationary Pressures Mount Post-Hurricane for Jamaica
The immediate aftermath of Hurricane Melissa is expected to drive a sharp increase in headline inflation, pushing it beyond the Bank of Jamaica’s target range of 4.0 to 6.0 per cent in the near term. In October 2025, headline inflation stood at 2.9 per cent. However, the MPC projects that this figure will rise considerably due to supply chain disruptions affecting food and other essential prices. This inflation surge is a major concern. Furthermore, core inflation, which excludes volatile food and fuel prices, is anticipated to breach the target range by mid-2026. The central bank has warned that it does not expect inflation to return to the target range until 2027. The risks to the inflation outlook are considered to be on the upside, with potential upward pressures arising from reconstruction efforts increasing domestic demand, heightened inflation expectations, and possible long-term damage to specific industries.
Rationale for Maintaining the Jamaica Policy Rate
The decision to maintain the policy rate at 5.75 per cent stems from the MPC’s assessment that the current inflationary pressures are primarily a result of supply-side shocks caused by the hurricane, rather than overheating domestic demand. The committee views preserving economic stability Jamaica as paramount to facilitating the nation’s recovery efforts. In addition to holding the Jamaica Policy Rate steady, the Bank of Jamaica has implemented special pre-emptive measures to ensure relative stability in the foreign exchange market, including selling US$210 million to the market since the hurricane’s passage.
Economic Context Prior to the Storm in Jamaica
Prior to Hurricane Melissa, Jamaica had benefited from a period of relatively low inflation, with headline inflation trending below the BOJ’s target. In August 2025, headline inflation was recorded at a low 1.2 per cent, with core inflation remaining stable within the 4-6 per cent target range. This stability had led to the BOJ’s decision in May 2025 to cut the policy rate from 6.0 per cent to 5.75 per cent, citing favorable economic conditions and inflation within its target. The economy had been showing signs of recovery, with projections for GDP growth.
Outlook and Future Considerations for Jamaica
The MPC’s decision signals a vigilant stance, acknowledging that while the immediate inflation surge is linked to the hurricane’s impact, underlying economic conditions and future risks require careful monitoring. The Government of Jamaica has indicated a temporary suspension of fiscal rules to support relief and recovery efforts, which may further influence economic dynamics. The Bank of Jamaica remains committed to its mandate of price stability and will continue to assess incoming economic data to guide future monetary policy decisions, aiming to anchor inflation expectations and foster conditions for long-term economic recovery following this significant news for jamaica.