CENTRAL banks are being forced to operate in a world where certainty no longer exists, and Jamaica and Belize are no exception.

That reality was laid bare at the Jamaica Stock Exchange Regional Investments and Capital Markets Conference last week, where senior officials from the Bank of Jamaica (BOJ) and the Central Bank of Belize warned that overlapping shocks from climate events, global supply disruptions, and geopolitical shifts are forcing a rethink of how monetary policy is executed in practice.

“What we’re really witnessing is not just a changing world — it’s seismic shifts. Shifts in trade and capital flows, changes in demography, recurring climate shocks, and rapid technological change are all happening at once. The crystal ball is just murky,” Dr Wayne Robinson, senior deputy governor of the BOJ, stressed.

He added that the era when central banks could confidently rely on single-point forecasts and central projections has passed, replaced by a need to plan across a range of possible outcomes and to communicate policy decisions in an environment where uncertainty is now structural, not temporary.

“Often the expectation is that central banks know everything or ought to know everything,” he said. “Well, I’m going to say something that may surprise you — often we don’t really know everything. That’s just the reality. So the question becomes: How do we communicate in an environment of uncertainty?”

The uncertainty has also reignited debate over whether central banks should lean against the wind through counter-cyclical policy or adopt a more accommodative, pro-cyclical approach in response to supply-driven shocks.

“It calls on us to think carefully about where we strike the balance,” Dr Robinson said, adding that consistency with the BOJ’s primary mandate remains central. “For us, that mandate is price stability. But it’s not simply a matter of raising or cutting interest rates. Timing matters, and so does how the tools are combined.”

For small, open economies like Jamaica and Belize, the challenge is compounded by the nature of the shocks they face. Unlike demand-driven cycles, recent disruptions — from hurricanes and climate volatility to supply-chain breakdowns — are largely supply-side, limiting the effectiveness of traditional interest rate tools.

“When a hurricane destroys crops or disrupts logistics, there’s not much interest rates can do about that. What we focus on is preventing second-round effects — ensuring that temporary price spikes don’t become entrenched inflation,” the deputy governor said.

Belize’s experience offers a parallel cautionary tale. Kareem Michael, governor of the Central Bank of Belize, traced how a major hurricane in the early 2000s pushed his country into a prolonged debt crisis that took years to unwind.

“I joined the central bank right after Hurricane Iris in 2001,” Michael told the audience. “What followed was a severe debt trap. We went to the international market three times at interest rates topping 15 per cent. We became serial defaulters.”

Belize did not meaningfully exit that cycle until 2021, when it executed an innovative debt-for-nature swap — known as the Blue Bond — that shaved nearly 15 percentage points off its debt-to-GDP ratio. From a peak of more than 130 per cent during the pandemic, Belize’s debt ratio has since fallen to about 63 per cent.

“The lesson,” Michael said, “is that shocks don’t arrive one at a time anymore. Volatility itself has become the problem.”

Both policymakers stressed that financial system resilience has become just as critical as inflation control. Weak balance sheets, Dr Robinson noted, can severely constrain the effectiveness of monetary policy, particularly during tightening cycles.

“If the financial system is under stress, banks won’t follow interest rate signals in the way you expect. That’s why building buffers matters,” he said.

Dr Robinson pointed to Jamaica’s capital adequacy ratios — about 14 to 15 per cent in the banking sector and roughly 22 per cent among securities dealers — as evidence that years of regulatory discipline have strengthened shock absorption, even as higher interest rates generated fair-value losses for some institutions.

Technology, particularly artificial intelligence, also featured prominently in the discussion — both as a source of disruption and a potential policy tool. Michael said Belize has begun assessing where AI can be responsibly deployed, especially in cybersecurity, regulatory oversight and forecasting, while Robinson suggested the technology could help reshape financial services and boost productivity in human capital-driven economies like Jamaica’s.

Still, both cautioned against assuming technology alone can restore certainty.

“The old models were built for a different world. We have to ask ourselves honestly whether we’re fit for what’s coming next — because right now, there’s still a lot we don’t know,” Michael said.