Jamaica Reduces Rate to 5.5%

The Bank of Jamaica reduced its policy rate to 5.50% during its February meeting, as the direct impact of Hurricane Melissa on inflation proved less severe than initially anticipated. The central bank noted that a faster-than-expected improvement in agricultural supplies and recent exchange rate appreciation helped annual inflation fall to 3.9% in January, while the moderation of second-round price increases has accelerated the projected return to the 4–6% target range. Although temporary breaches of the target are possible in mid-2026, lower inflation expectations and stable core inflation have reduced the likelihood that prices will remain elevated for longer. While the post-hurricane recovery and fiscal spending pose upside risks, the international reserves remain healthy and are projected to improve further. Economic activity is projected to contract by -1.0 to -3.0% in 2025/26 before recovering in 2026/27, with the central bank remaining ready to adjust policy if needed.