Senior deputy governor of the Bank of Jamaica (BOJ), Wayne Robinson, said the central bank will use the next few weeks to conduct a full assessment of damage associated with Hurricane Beryl before taking a position on any adjustments to monetary policy.

Hurricane Beryl impacted Jamaica on Wednesday, leaving at least two dead and much of the island without electricity. Residents have also reported torn off roofs, downed trees, and impassible roadways due to flood waters.

“Of course, as you can appreciate, the storm is of major concern to us, but we are not yet able to take a position. We know that several areas, particularly in the west, were badly affected, but we have to do a proper assessment first, and thereafter we will be able to take a position or provide a statement,” Robinson told the Jamaica Observer.

The assessment would be critical for the BOJ, with it signalling just last week that it could be ready to start cutting interest rates that have been held at 7 per cent for the last three years to help combat runaway inflation that reached 11.8 per cent in April 2022 but has since retreated to the midpoint of its 4 per cent to 6 per cent target range for the last three months.

Destruction or damage caused to farms due to hurricanes in the past has led to price spikes for agricultural commodities as shortages emerge. BOJ, with a keen eye on the impact that weather events could have on its fight to keep inflation low, said after its June 26 and 27 meeting that “the potential for worse-than-anticipated weather conditions” was amongst reasons cited for keeping its policy rate steady, at least until its August meeting.

How Beryl will impact its decision is left to the assessment of the damage in coming days.

“We have to meet with the government ministries and agencies to get a proper assessment of the level of damage, but we are concerned…” Robinson told BusinessWeek.

Central banks generally need to carefully assess the economic impact of hurricanes since such natural disasters can impact the economy in several ways, the most significant being economic disruption based on the level of damage to infrastructure, businesses, homes, and agriculture. Such disruption can lead to a decrease in economic activity, affecting gross domestic product growth.

Based on the damage, central banks may need to adjust their monetary policy to support economic recovery, which means lowering interest rates to stimulate spending and investment.

On the other hand, the BOJ may need to increase or hold rates steady for a longer period, as the destruction of goods and disruption of supply chains can lead to shortages and price increases for certain items, causing inflationary pressures.

Further, any increase in government spending for disaster relief and reconstruction efforts following a hurricane can influence the central bank’s decisions on interest rates and other monetary tools to balance inflation and support economic stability. Major hurricanes can also lead to financial instability if banks and other financial institutions face significant losses due to property damage and non-performing loans. The BOJ may need to provide liquidity support to ensure the stability of the financial system.

The economic impact of hurricanes can also affect a country’s exchange rate by influencing trade balances and investor confidence. Ultimately, central banks may need to intervene in the foreign exchange market or adjust interest rates to stabilise the currency.