KINGSTON, Jamaica — The Bank of Jamaica (BOJ) is forecasting that inflation will remain low and stable over the next two years.

The projection was announced by Governor Richard Byles during the Bank’s quarterly monetary policy press conference, held at its downtown Kingston headquarters on Thursday.

Byles noted that headline inflation for July 2025, as reported by the Statistical Institute of Jamaica (STATIN), stood at 3.3 per cent – lower than the figure recorded a year earlier and below the bank’s target range of four to six per cent.

Inflation is expected to remain low and below the target range over the coming months, but is projected to gradually return to the four to six per cent corridor within the next two years.

Explaining the current period of below-target inflation, Governor Byles cited several short-term factors.

These include the temporary impact of improved agricultural supplies and faster reductions in food prices, following the sectoral shock in 2024; lower electricity costs resulting from the reduction in the general consumption tax (GCT) on electricity charges; and the waning effects of previous increases in public transport fares, coupled with the absence of new fare adjustments.

Additionally, Byles said the bank projects only a marginal first-round impact on domestic prices resulting from recent tariff adjustments by the United States.

“The overall outlook assumes continued low imported inflation, particularly on grains and oil, and stable inflation expectations,” he further stated.

Governor Byles said consequent on the prevailing low inflation rate being driven by temporary factors, it is anticipated that the outturn will eventually return to the four to six per cent target range, once the cumulative impact of these factors subsides.

Against the backdrop of low domestic inflation and global economic uncertainties, the BOJ’s Monetary Policy Committee (MPC) announced its decision on Wednesday, August 20, to maintain the policy interest rate at 5.75 per cent per annum. The committee also reaffirmed its commitment to preserving relative stability in the foreign exchange market.

The central bank stated that its current monetary policy stance, including the maintenance of the policy interest rate at 5.75 per cent per annum, continues to support the containment of inflation within the four to six per cent target range over the next two years.

In addition to subdued domestic inflation, the BOJ’s August 20 announcement underscored continued economic expansion, a surplus on the current account, and historically high foreign currency reserves, which stood at US$6.1 billion as at July 2025.

The BOJ inflation projection and monetary policy decision also considered uncertainties in the global economy.

“The risks to the inflation forecast for Jamaica are skewed to the upside, which means that inflation could be moderately higher than projected. Higher inflation could stem from a sharper-than-anticipated increase in the tariffs faced by the US’s trading partners, resulting in higher imported inflation and elevated inflation expectations. In addition, inflation could be higher than projected if there is a further escalation in geopolitical tensions, which could negatively impact international supply chains,” Byles said.

The governor added that lower inflation could, however, result from lower-than-projected international commodity prices as well as weaker demand conditions.

Byles acknowledged that the economic outlook remains clouded by uncertainties surrounding US policy shifts, particularly as it recalibrates its trade relationships and tightens immigration controls.

These developments, he noted, may dampen the pace of global economic activity and contribute to inflationary pressures in the US, which could, in turn, pose downside risks to Jamaica’s growth prospects and exert upward pressure on domestic prices

Byles said even with uncertainty and the potential headwinds in the global landscape, the central bank reaffirms its commitment to maintaining low and stable inflation at four to six per cent, and will deploy the tools necessary to preserve price stability.

“Bank of Jamaica will continue to carefully monitor the incoming data and adjust its policy accordingly. Moreover, the bank’s Monetary Policy Committee remains committed to its work programme to further strengthen the policy transmission process,” the governor stated.

— JIS