THE Bank of Jamaica (BOJ) enters the final day of its policy meeting on Wednesday, needing to balance the fastest rise in consumer prices in over a decade against clear signs of weak domestic demand before tomorrow’s interest rate announcement. New data show a hurricane-driven inflation surge moving through an otherwise sluggish economy.

Statistics released by the Statistical Institute of Jamaica (Statin) on Monday showed the All-Jamaica Consumer Price Index rose 2.4 per cent in November compared to October. This was the largest monthly inflation rate since September 2013, driven overwhelmingly by a 6 per cent jump in the cost of food and non-alcoholic beverages.

The figures provide the first full snapshot of Hurricane Melissa’s economic impact in official inflation data, after the storm made landfall on October 28. The cost of vegetables, tubers, plantains, and green bananas soared 19.1 per cent in the month, with specific items including tomatoes, pumpkins and sweet peppers leading the increase. Fruit and nut prices rose 8.8 per cent.

However, the inflationary fire was tightly contained. The housing, water, electricity, gas, and other fuels division saw a 0.3 per cent decline, primarily due to lower electricity rates. Prices for transport, clothing and footwear, furnishings, and recreation were virtually unchanged, rising between zero and 0.3 per cent.

This pattern aligns with the central bank’s November forecast that “the economy is projected to contract significantly” due to the hurricane. The data confirms the price spike is a classic supply shock, isolated to hurricane-ravaged sectors, rather than evidence of broad, demand-led inflation.

In response to the crisis, the BOJ has already acted to facilitate liquidity. A separate release projected the value of currency issued would grow by approximately 7 per cent in December, a $21-billion increase. The bank stated this reflected normal seasonal demand amplified by “precautionary demand for cash” and remittance inflows related to the storm. These inflows represent a critical financial lifeline from the diaspora. Following a storm that destroyed tens of thousands of homes and devastated the agricultural sector, families abroad are sending funds for immediate necessities and rebuilding — money that is swiftly converted to and spent in Jamaican dollars.

Still, the data presents a direct challenge to the central bank’s recent policy path. After raising its benchmark rate to 7 per cent post-pandemic to combat inflation, the BOJ began an easing cycle in August 2024. It has cut rates six times since then, in 25 basis-point increments, with the last reduction in May bringing the rate to 5.75 per cent, where it has since held.

Now, the Monetary Policy Committee must decide whether the hurricane-driven price surge fundamentally undermines the disinflationary trend that justified those cuts. Policymakers now face a difficult choice between fighting the spike in food prices and supporting an economy where most other prices are flat and demand is weak.

Economist Keenan Falconer argued that the nature of the inflation should permit the bank to continue its supportive stance. “The anticipated inflationary pressures from the hurricane will mostly be cost-push rather than demand-driven inflation as a result of the supply shock to agriculture and this is reflected in mainly food price increases,” Falconer said in written responses to Jamaica Observer.

He noted that “inflation in most other categories remains subdued owing to the suppression of domestic demand prior to the storm,” a situation he linked to previous monetary tightening. Falconer urged the central bank to consider “incremental rate cuts of 25-50 bps during 2026” to foster credit expansion and accelerate recovery in key sectors like agriculture, construction and tourism.

For households and businesses, the decision carries direct financial consequences. The cost-of-living crisis, reflected in the 19.1 per cent jump for basic staples, is squeezing disposable income. Conversely, for firms needing to rebuild or invest, the cost and availability of credit are paramount. A decision to hold or raise rates to fight inflation would keep borrowing costs higher, potentially slowing the recovery. A decision to cut, however, risks leaving Jamaicans exposed to even higher prices if the current inflation proves less temporary than hoped.

The committee’s choice to be announced Thursday will therefore be a direct response to the evidence before it: a historic, supply-driven spike in the cost of living set against a backdrop of widespread price stagnation and an official forecast for economic contraction. The decision will signal which dataset the bank views as defining the immediate future — the alarming inflation in hurricane-ravaged sectors, or the weak price pressures and demand across the rest of the economy. It is the second such climate-driven dilemma in 16 months, after Hurricane Beryl triggered an identical monthly inflation rate in August 2024, underscoring the recurring disruption extreme weather now poses to economic stability.