THE Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC) is set to meet again on June 26 and 27, with its next policy decision scheduled for release on June 30. The meeting comes at a pivotal moment, as global and domestic economic signals remain mixed and the influence of the US Federal Reserve’s (FOMC’s) latest decisions loom large over Jamaica’s outlook.

At its last meeting in May, the MPC unanimously voted to cut the policy rate by 25 basis points to 5.75 per cent, diverging from staff advice to hold steady amid warnings that US tariffs and volatile liquefied natural gas (LNG) prices could stoke imported inflation. Staff economists had cautioned that a “10 per cent tariff on all imports from China” and other US trade actions could threaten Jamaica’s inflation stability and external demand, with worst-case simulations predicting significant risks to the domestic economy.

However, after updated risk assessments, the committee concluded that while risks were “slightly skewed to the upside”, domestic buffers — such as high employment, easing wage pressures, a current account surplus of 1-2 per cent of GDP, and rising reserves — would help blunt external shocks. The MPC pointed to the rebound in mining and tourism as supporting a GDP growth forecast of 1-3 per cent for fiscal year 2025/26.

FOMC’s Stance Heightens Uncertainty

The BOJ’s next move will be shaped in part by the latest signals from the US Federal Reserve. At its June 18 meeting, the FOMC held its policy rate steady at 4.25-4.5 per cent, citing persistent inflation above its 2 per cent target and ongoing uncertainty from evolving U.S. trade and fiscal policies. Fed Chair Jerome Powell acknowledged that recent tariffs are pushing up prices and weighing on sentiment, with the effects on inflation potentially being “short-lived” or, if expectations become unanchored, more persistent.

The FOMC’s latest projections show US GDP growth slowing to 1.4 per cent this year and 1.6 per cent next year, with inflation expected to remain above target for longer than previously forecast. The Fed now anticipates only two rate cuts by the end of 2025, a slower pace of easing than markets had hoped. Powell noted that “increases in tariffs this year are likely to push up prices and weigh on economic activity”, and that the Fed remains “well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance”.

Implications for Jamaica

The BOJ has explicitly recognised that US monetary policy decisions and trade actions are key external risks for Jamaica. The MPC’s May minutes and press release highlight that higher US tariffs could lead to increased imported inflation, while a slower US economy may dampen demand for Jamaican exports and tourism. The Fed’s decision to keep rates high for longer could also limit the BOJ’s room to cut rates further without risking capital outflows or exchange rate pressures.

Despite these headwinds, the BOJ’s baseline forecast remains cautiously optimistic, projecting that inflation will remain within the 4-6 per cent target range and that domestic growth will recover as key sectors normalise. The MPC has reaffirmed its commitment to “closely monitor domestic inflation expectations and any upward pressure on prices caused by the evolving tariff landscape”, and stands ready to adjust policy if risks materialise.

Market Awaits June Decision

With the June MPC meeting approaching, market participants and business leaders are watching closely to see whether the BOJ will continue to ease policy or pause amid global uncertainty. The committee’s decision will hinge on the balance between resilient domestic fundamentals and the evolving external environment, particularly the trajectory of US monetary policy and trade actions.

As the BOJ weighs its options, it faces the delicate task of supporting growth while guarding against imported inflation and external shocks — a challenge made more complex by the uncertain path of the US economy and the Fed’s cautious stance.

The MPC’s decision will be announced on June 30.