THE Bank of Jamaica (BOJ) is expected to announce a reduction in its key policy interest rate on Monday, according to economists and market analysts, as inflation continues to stay within the central bank’s target range and recent developments in the US Federal Reserve’s monetary policy signal easing.

At its August 2025 meeting, the BOJ’s monetary policy committee (MPC) held the policy rate steady at 5.75 per cent, viewing the current stance as appropriate to maintain inflation within the 4 per cent to 6 per cent target range over the medium term. The MPC minutes indicated an inflation outlook trending towards the lower bound of the target band, with key support from an improved supply situation in the agriculture sector following Hurricane Beryl and a reduction in electricity taxes.

New data from the Statistical Institute of Jamaica’s Consumer Price Index (CPI) Bulletin for August 2025 reinforces the subdued inflation environment. The All Jamaica CPI increased by 0.3 per cent that month, marking a low point-to-point inflation rate of 1.2 per cent from August 2024 to August 2025. The main upward pressure came from food and non-alcoholic beverages, which rose 0.8 per cent due to higher prices for agricultural produce such as watermelon, sweet potato, Irish potato, and cabbage. Conversely, prices for electricity declined by 1.3 per cent, consistent with the MPC’s notes on lower electricity rates contributing to reduced inflation pressure.

Brian Fraser, deputy CEO of VM Investments Limited, pointed to this inflation profile alongside recent US monetary policy moves as reasons for an expected cut by the BOJ. “We expect between now and December, between a 25-to-50 basis point cut locally,” Fraser told Jamaica Observer. “Inflation is now solidly in line with BOJ projections.”

Economist Keenan Falconer expects at least a 25-basis-point reduction but stressed a cautious and gradual approach by the BOJ, considering upside inflation risks. “With near-term inflation expectations skewed to the upside and potential inflationary headwinds on the horizon, I anticipate the BOJ will temper any aggressiveness in rate reductions,” Falconer said.

Financial economist Adrian Stokes, who is also the CEO of Quantas Capital, an alternative asset management company, highlighted the close influence of US Federal Reserve policy on Jamaica’s central bank. He noted that with inflation below the upper target and sluggish domestic economic growth, “interest rates in Jamaica need to go lower to support a rebound in the local economy”.

The US Federal Reserve lowered its benchmark policy rate by 25 basis points in mid-September amid moderating economic growth and persistent inflation pressures. This move reinforces expectations of a BOJ rate cut, given the traditionally close alignment of Jamaica’s monetary policy with US trends.

Since May 2025, when the BOJ last cut its policy rate to 5.75 per cent from 6.00 per cent, inflation has generally remained contained, supporting calls for further easing. The central bank also continues to focus on maintaining relative stability in the foreign exchange market amid external uncertainties.

An upcoming reduction in the BOJ policy rate could facilitate lower borrowing costs for businesses and consumers, stimulating economic activity. However, the MPC is likely to balance support for growth with vigilance over inflation risks and global developments.

FALCONER….with near-term inflation expectations skewed to the upside and potential inflationary headwinds on the horizon, I anticipate the BOJ will temper any aggressiveness in rate reductions.

STOKES… I expect the Bank of Jamaica to cut interest rates at its next [announcement]. This is based on inflation being below the upper end of the bank’s target range, plus the fact that economic growth is fairly sluggish,

The Bank of Jamaica headquarters in Kingston. The central bank is poised to announce an interest rate cut on Monday amid subdued inflation and changing global monetary conditions.