Dr Jide Lewis, deputy governor, financial institutions supervisory division (left) and Richard Byles, Governor of the Bank of Jamaica.
‘Wait and see’
BOJ insists more data needed before policy shift, amidst recession talks
WITH economic growth slowing and concerns mounting over a potential recession, Bank of Jamaica (BOJ) has signalled that a clearer assessment of Jamaica’s trajectory will only emerge after the March quarter, when more data on remittances, inflation, and business activity become available.
Governor Richard Byles, addressing reporters at BOJ’s first monetary policy press conference for 2025, acknowledged that two consecutive quarters of negative GDP growth technically qualify as a recession. However, he maintained that broader economic indicators — such as high employment levels and stable business confidence — suggest the downturn may not be prolonged. The central bank is now taking a cautious approach, opting to “wait and see” before making definitive policy shifts.
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Jamaica’s economy is estimated to have contracted by 1.8 per cent in the December 2024 quarter, following a 3.5 per cent decline in the previous quarter. While the decline has raised concerns, BOJ argues that the contraction was heavily influenced by weather-related disruptions — including Hurricane Beryl’s impact on agriculture and mining. The bank also pointed to relative stability in the exchange rate and declining inflation as signs that the economy remains resilient.
“The data will tell us whether we are in a long recession or a short one that we will come out of quickly,” Byles said, indicating that the central bank will be monitoring remittance inflows, consumer spending, and credit growth over the coming months to gauge the economy’s true direction.
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One of the biggest factors influencing the economic outlook is remittance inflows, which remain a key pillar of foreign exchange earnings and household spending in Jamaica. BOJ has expressed concern about potential US policy changes under a new Administration, particularly if restrictions on remittance transfers from non-citizens are implemented.
“If restrictions are placed on remittances it will certainly impact flows into Jamaica and companies such as Lasco and GraceKennedy, which operate in the sector,” a journalist pointed out during the press conference. Byles agreed, stating that BOJ is watching to see how these policies evolve.
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Meanwhile, the US Federal Reserve’s stance on interest rates also looms large. The Fed has indicated that it will keep rates steady for the near future, which could affect investment flows and the demand for foreign exchange in Jamaica. BOJ remains cautious, suggesting that further adjustments to monetary policy may be needed depending on how these global risks unfold.
Beyond remittances, BOJ is also monitoring consumer credit and loan growth, which can provide insight into economic confidence. Recent data suggest that while loan growth continues, it has slowed — from 13.7 per cent growth in previous years to about 5 per cent growth in 2024. Byles noted that the banking sector remains well-capitalised but hinted that the central bank will be paying close attention to credit demand in the coming months.
Inflation, while remaining within BOJ’s target range of four to six per cent, is another area of concern. While the bank believes inflation will stay controlled, there are upside risks including higher shipping costs and pending increases in public transportation fares. BOJ confirmed that it has not been consulted on the potential inflationary impact of taxi fare hikes, raising further questions about cost of living pressures.
Adding another layer of complexity, Jamaica is in an election year, which could influence both economic policies and business sentiment. Historically, election cycles have coincided with increased government spending and shifts in investor confidence. BOJ is likely to weigh these factors carefully as it navigates monetary policy decisions in the months ahead.
While some economists argue that Jamaica is already in a recession, BOJ remains hesitant to make that call, preferring to analyse a fuller data set after the March quarter.
“What is the conclusion we draw from these two quarters of a recession? Is it that the sky is falling, or is it that there are other factors suggesting this is only temporary? We need to see more data before making that call,” Byles explained.
In the meantime BOJ has held policy rate steady at 6.0 per cent until March 27, when the Monetary Policy Committee (MPC) next meets. The decision, unanimously agreed on by the central bank’s MPC, marks a shift from BOJ’s four consecutive rate cuts in late 2024. Between August and December 2024 the central bank trimmed rates by 100 basis points, responding to inflation cooling from 7.4 per cent in January 2024 to 4.7 per cent in January 2025.
