THE Bank of Jamaica held its policy rate at 5.5 per cent on Tuesday, warning that a surge in global oil and commodity prices driven by the US-Israeli war with Iran could push inflation above target and weigh on growth in the months ahead.

The central bank said its monetary policy committee (MPC) unanimously agreed to keep rates unchanged, arguing that the current stance remains appropriate to guide inflation back into its 4 to 6 per cent target band over time.

Inflation stood at 3.9 per cent in February, below the lower end of the target, but the bank signalled that the trajectory has shifted.

“The inflation outlook is now subject to a high degree of uncertainty,” the committee said, pointing to sharp increases in international commodity prices, particularly oil, liquefied natural gas, fertiliser and shipping costs linked to the conflict.

For Jamaica, the pass-through is direct. Higher oil prices feed into electricity and transport costs, while rising shipping rates and fertiliser prices lift food and imported goods inflation across the economy.

The shock is already materialising. The bank said West Texas Intermediate crude prices rose 39.5 per cent month on month in March-to-date, fertiliser prices climbed 20.3 per cent, and grains prices increased 4.2 per cent. Since the start of the conflict, oil prices have surged by roughly 60 per cent, reflecting supply risks tied to disruptions in the Strait of Hormuz, a key global energy corridor.

Against that backdrop, the MPC said risks to inflation over the next eight quarters are skewed to the upside, with a prolonged or widening conflict likely to drive further increases in global prices.

The bank also warned that stronger domestic demand linked to post-hurricane recovery and rising inflation expectations could amplify price pressures, although weaker consumer purchasing power may temper the impact.

To contain foreign exchange pressures, BOJ said it would continue targeted interventions, including directly supplying foreign currency to selected energy sector players to preserve market stability.

Jamaica’s international reserves, which stood at approximately US$6.8 billion in February, remain a key buffer, supporting foreign exchange availability amid heightened external volatility.

The MPC also flagged risks to growth, noting that while the economy is projected to expand between 1 and 3 per cent in fiscal year 2026/27, an escalation of the conflict could weigh on tourism and related services.

Separately, private-sector credit growth slowed to 6.9 per cent in January from 8 per cent in December, reflecting moderating lending to both businesses and households, even as the banking system remains well capitalised and liquid.

The central bank said it stands ready to tighten policy if the external shock leads to persistent second-round effects that threaten its inflation target.

The next policy decision is scheduled for May 20.