BOJ cuts interest rate to 5.75 per cent, warns of US policy risks
THE Bank of Jamaica (BOJ) on Tuesday announced a 25 basis points cut in its key interest rate to 5.75 per cent, its first reduction this year, saying initial US tariff impacts on prices should be minimal though future growth may be affected.
The central bank’s monetary policy committee (MPC) said the decision reflects inflation’s sustained return to the 4-6 per cent target band since September 2024. “Annual headline inflation at April 2025 was 5.3 per cent, in line with the outturn for April 2024,” the BOJ noted, adding that core inflation — which excludes volatile food and fuel prices — held steady at 4.4 per cent.
Price stability has been supported by lower global commodity costs, with grain prices down 15.1 per cent year-over-year and oil prices declining 8 per cent. “The stable and relatively low headline inflation outturn primarily reflected the non-recurrence of price increases for regulated items (such as bus and taxi fares)”, the central bank said.
The BOJ also noted that while “the first-round impact of the increase in US tariffs on prices in Jamaica will not be significant”, there may be “some impact of these policies on Jamaica’s GDP growth and the external accounts.” The bank warned that “the risks to the inflation forecast are skewed to the upside”, pointing to potential pressures from global supply chains and commodity prices.
Still, it projects Jamaica’s economy to rebound to 1.0-3.0 per cent growth in FY2025/26 after a contraction last year, even as employment levels “remain high” and wage pressures are “moderating”. However, the MPC cautioned that uncertainty around US policy shifts — including trade, immigration, and fiscal changes — could “slow the pace of economic activity and increase inflationary pressures” globally.
Given those uncertainties, the BOJ has indicated that it is ready to “deploy the tools necessary to preserve stability”.
“We are prepared to adjust policy if inflation risks materialise,” the BOJ said, adding that its action will be dependent on available data. It next meets in late June and will announce another decision on June 30.
The rate reduction marks a shift from the BOJ’s 2022 tightening cycle, when it raised rates to 7 per cent to curb inflation. Now, with price pressures easing and the economy stabilising, the central bank is cautiously pivoting toward supporting growth — while keeping a close eye on global turbulence.
