The Bank of Jamaica(BOJ) says the outlook for real economic activity for next two fiscal years is likely to be in line with the last forecast and that preliminary indicators suggest that the economy should expand in the September 2025 quarter, resulting from expansions in electricity and water supply, agriculture and tourism and its allied services.
The BOJ’s Monetary Policy Committee (MPC) which earlier this month deliberated on the bank’s monetary policy stance in the context of continued low domestic inflation, global uncertainties and evolving interest rate trajectories in major developed countries, said thereafter, economic activity is anticipated to strengthen throughout financial year 2025/26.
‘In this context, real gross domestic product (GDP) is projected to recover in financial year 2025/26 in the range of one to three per cent, largely due to growth in the agriculture, mining, and tourism sectors,’ said the BOJ, which is also the country’s central bank.
It said in August this year, headline inflation in the United States increased to 2.9 per cent from 2.7 per cent in July 2025 and that it is projected to remain above the US Federal Reserve’s (Fed) target of two per cent for the remainder of the year.
‘BOJ’s July 2025 survey of businesses’ inflation expectations indicated that respondents expected inflation 12 months ahead to be seven per cent, generally stable relative to 7.1 per cent in the previous survey.’
The BOJ said the domestic banking system remains sound with adequate capital and liquidity and that the domestic fiscal policy stance continues to pose no risk to inflation over the near term.
‘The MPC reaffirms its commitment to maintaining low and stable inflation. To this end, the Committee will continue to monitor the incoming data and adjust its policy accordingly. This includes maintaining heightened surveillance of the trajectory of core inflation relative to the lower bound of the inflation target range,’ said the MPC which is chaired by Richard Byles, the BOJ Governor.
The BOJ said that during its meeting it also determined that the current policy stance continues to be appropriate to support inflation converging to the target range and therefore, unanimously agreed to hold the policy rate, which is offered to deposit-taking institutions (DTIs) on their current account balances at the BOJ) at 5.75 per cent per annum.
It also agreed to continue taking measures to preserve relative stability in the foreign exchange market.
The decision to maintain the policy rate is based on several factors including that while headline inflation of 1.2 per cent at August 2025 is below the bank’s target range of four to six per cent, core inflation continues to track within the target range.
‘Moreover, the causes of the low headline inflation rate at August 2025 are temporary,’ the BOJ said, noting that the temporary factors that caused low headline inflation in August were primarily related to improvements in supply conditions.
‘In particular, agricultural prices during the month were lower than a year earlier, when prices rose due to the negative impact of Hurricane Beryl on domestic crop production. Supplies improved subsequent to the adverse weather, leading to prices reverting to more normal levels.
‘In addition, the dissipation of the impact of a previous adjustment in public transport fares, as well as a reduction in the General Consumption Tax (GCT) on electricity consumption announced by the government in March 2025, contributed to lower-than-targeted inflation. ‘
The BOJ said that economic indicators continue to point to a stable macroeconomic environment.
‘Further, with stable domestic interest rates, the decline in interest rates abroad has improved the differential between domestic and external rates, which should better support stability in the foreign exchange market.
‘In addition, the current account of Jamaica’s balance of payments is projected to remain in surplus over the near term, and the international reserves are healthy and are projected to improve further.’