Bank of Jamaica headquarters, downtown, Kingston.
BoJ holds rate steady
The Bank of Jamaica (BOJ) held its policy rate at six per cent during its March 2025 Monetary Policy Committee (MPC) meetings, citing confidence in the country’s improving inflation trends. However, the central bank also sent a strong signal that it is prepared to act decisively should inflationary pressures resurface.
“The MPC reaffirmed its commitment to maintaining low and stable inflation and stands ready to take aggressive action if inflation deviates upwards from the target,” the committee stated in the release announcing its decision.
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At the same time, the BOJ reduced the interest rate on its Standing Liquidity Facility (SLF) from eight per cent to seven per cent, effective March 28, 2025. This facility provides overnight funding to banks facing short-term cash shortages, and the move is aimed at fostering stability in short-term market interest rates.
“Reducing the margin facilitates more stability in short-term market interest rates around the policy rate, which will help strengthen Jamaica’s monetary transmission mechanism,” the BOJ explained.
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The SLF is a key tool used by the BOJ to ensure that deposit-taking institutions have access to overnight funding when needed. By lowering the SLF rate by one percentage point, the BOJ aims to reduce borrowing costs for banks facing short-term cash flow gaps. This adjustment could encourage banks to lend more freely, potentially benefiting businesses and consumers while supporting overall financial system stability.
“The SLF rate reduction is designed to reinforce monetary policy by narrowing the gap between short-term market rates and the policy rate,” according to the BOJ’s statement. The move could ease liquidity pressures without undermining efforts to keep inflation under control.
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Inflation in Jamaica has shown significant improvement. Headline inflation fell to 4.4 per cent in February 2025, down from 6.2 per cent a year earlier, while core inflation — which excludes volatile food and energy prices — remained at 3.8 per cent for the 20th-consecutive month below the BOJ’s upper limit of six per cent.
The MPC attributed this progress to several factors, including stable exchange rates, reduced imported inflation due to lower global commodity prices, and moderated private sector wage pressures.
“Inflation has stabilised in the bank’s target range,” the MPC noted, projecting that it will remain within this range over the next two years barring any new shocks.
However, external risks loom large. The BOJ highlighted uncertainties stemming from potential changes in economic policies among Jamaica’s key trading partners, including trade policy adjustments by the United States and retaliatory measures by China and Canada.
“These new trade policies could impact imported inflation for Jamaica,” the MPC warned, adding that mixed trends in commodity prices and high US interest rates also pose challenges.
While holding rates steady for now, policymakers remain vigilant about global developments that could disrupt Jamaica’s economic stability. The central bank has pledged to intervene decisively if inflation rises above its target range of 4-6 per cent or if external shocks threaten financial stability.
The next monetary policy decision is scheduled for May 2025.
