JAMAICA’S inflation is heading above the Bank of Jamaica’s (BOJ) target range just as the country begins rebuilding after Hurricane Melissa, leaving policymakers trying to contain rising prices without slowing an economy still recovering from the storm.

Conflict in the Middle East is driving up global oil prices and shipping costs, increasing the price of imported fuel and other goods flowing into Jamaica, while reconstruction spending linked to Hurricane Melissa is expected to push more money through the domestic economy as rebuilding accelerates.

BOJ’s latest policy discussion summary showed businesses now expect inflation over the next 12 months to average 7.1 per cent, up from 6.5 per cent previously and above the central bank’s 4 to 6 per cent target range.

Businesses now expecting inflation above BOJ’s target range also increase the risk that companies begin adjusting prices upward before higher costs fully filter through the economy.

The assessment came Wednesday when BOJ’s Monetary Policy Committee left its benchmark policy rate unchanged at 5.5 per cent, saying the inflation outlook had become “highly uncertain” because of escalating geopolitical tensions and rising global commodity prices.

BOJ also maintained special foreign exchange measures aimed at limiting volatility in the local currency market, including direct foreign exchange support for selected energy sector entities and pre-announced US dollar sales into the market.

The central bank now expects headline inflation — which measured 4.3 per cent in April — to rise through the June and September 2026 quarters, temporarily moving above the target range before easing later as geopolitical tensions decline and global oil supplies stabilise. Core inflation, which excludes the most volatile price movements, also edged up to 4.1 per cent in April from 4.0 per cent in March.

BOJ warned that damage to oil infrastructure and supply chain disruptions linked to the worsening Middle East conflict were expected to keep international fuel prices elevated over the near term.

“This is expected to place upward pressure on electricity costs in Jamaica,” BOJ said, adding that higher fuel and transportation costs could feed through to food distribution, business expenses and the wider prices paid for goods and services across the economy.

Reconstruction spending linked to Hurricane Melissa is also expected to increase domestic demand at a time when imported fuel, shipping and food costs are already rising.

Even with inflation risks mounting, the committee chose not to raise interest rates further, signalling concern about placing additional pressure on economic activity during the rebuilding phase.

The central bank projected economic growth between 1 and 3 per cent for fiscal year 2026/27 but warned that risks were tilted to the downside because of the likely effects of the Middle East conflict on tourism and related service industries, alongside rising imported costs.

Private sector credit growth continued to moderate during the March 2026 quarter, slowing to 6.5 per cent from 7.8 per cent in December 2025 as borrowing by businesses and individuals eased.

US inflation rose to 3.3 per cent in March from 2.4 per cent a year earlier, while West Texas Intermediate crude oil prices climbed 21.5 per cent during the March quarter. Grain prices rose 5.2 per cent and shipping costs increased 13.0 per cent over the same period, reinforcing BOJ’s warning that imported inflation pressures are expected to remain elevated over the near term.

The bank also noted that Jamaica’s foreign reserves remained strong and were expected to continue providing a buffer against external shocks and volatility in the foreign exchange market.

BOJ said risks to the inflation outlook remained “skewed to the upside”, citing the possibility of a broader or more prolonged Middle East conflict, adverse weather conditions, stronger-than-expected domestic demand during reconstruction and the risk that elevated inflation expectations become entrenched.

“The MPC is prepared to adjust its monetary policy stance if the conflict in the Middle East is protracted, resulting in sustained price increases,” the bank said. The next policy decision is scheduled for June 29, 2026.