RICHARD Byles’ final appearance before Parliament as governor of the Bank of Jamaica (BOJ) was less a farewell than a handover note.

He leaves office in August with stronger foreign reserves, a relatively stable exchange rate, and no bank failures during almost seven years marked by a pandemic, supply-chain shocks, two major hurricanes, and wars in Ukraine and the Middle East.

But he also leaves his successor with a problem ordinary borrowers and businesses know well: BOJ can move its policy rate but the effect does not always show up quickly or fully in commercial bank lending rates.

Byles told the Standing Finance Committee of Parliament on June 10 that weak monetary transmission remains a structural challenge. In Jamaica’s concentrated banking system, he said, the pass-through of BOJ’s policy signals to credit and lending rates is constrained and will not resolve itself quickly.

Put simply, a BOJ rate decision does not automatically mean customers will quickly feel the full effect in mortgage rates, business loans, car loans, deposit rates or other credit conditions.

That is one of the most difficult issues the next governor will inherit.

Byles, who became BOJ governor in August 2019, used his final report to Parliament to defend the central bank’s record through what he described as a period of “considerable exogenous turbulence”. He listed the global pandemic, global supply-chain disruptions, two major hurricanes, and the wars in Ukraine and the Middle East among the shocks faced during his tenure.

On inflation, Byles said Jamaica recorded average annual inflation of six per cent between September 2019 and April 2026. Excluding the global supply-chain inflation period between April 2021 and March 2023, inflation averaged five per cent per year — within BOJ’s four-to six-per cent target range.

He also pointed to the foreign exchange record. The exchange rate, he said, depreciated at a moderate average of 2.9 per cent per year during his tenure, broadly in line with Jamaica’s inflation difference with the United States. Gross international reserves rose from US$3.6 billion in 2019 to US$6.4 billion at May 2026.

The reserves position is not just a central bank scorecard. For households and businesses it helps answer one of the most practical questions in the economy: How much room does BOJ have to protect stability in the foreign exchange market if oil prices stay high?

The stronger reserve buffer gives BOJ space to supply foreign currency to critical areas, including selected energy sector entities, and to limit disorderly movement in the Jamaican dollar. But if the Middle East conflict drags on, fuel imports rise further, and reconstruction demand keeps pulling in more goods, repeated intervention would put the central bank’s capacity to defend currency stability under sustained pressure.

BOJ said that at May 26, 2026, the exchange rate had appreciated by 1.5 per cent year over year to $157.90 to US$1, compared with depreciation of 2.3 per cent over the previous 12 months. The central bank said the market had been supported by its strategic use of reserves to increase US-dollar supply and reduce volatility. Gross international reserves stood at about US$6.5 billion, or 138.5 per cent of the level assessed as adequate.

The pressure on the dollar is tied to the same forces now pushing inflation higher: fuel imports, reconstruction-related imports, and the tourism hit from Hurricane Melissa are expected to weaken Jamaica’s external accounts.

BOJ projects the current account balance for FY2025/26 to land between a deficit of 0.5 per cent of GDP and a surplus of 0.5 per cent, down from a surplus of 3.0 per cent of GDP in FY2024/25.

Inflation was 4.3 per cent at April 2026, up from 2.1 per cent at September 2025, though still inside the target range. The increase came mainly from higher petrol prices and agricultural food inflation. Core inflation, which strips out some of the more volatile movements, was 4.1 per cent, suggesting that underlying price pressure was still relatively contained at that point.

But BOJ expects inflation to move above the upper end of the target range over the June and September quarters. The pressure is expected to come mainly from higher energy and transport costs, the knock-on effect of higher energy prices on other goods and services, and spending linked to post-hurricane reconstruction.

For households, the pressure could show up in transport, electricity, food distribution, and other prices tied closely to fuel and logistics.

For businesses, the recovery period may still carry higher input costs, uncertain shipping prices, and tighter financing conditions than many firms would prefer.

The policy problem is that the economy is still weak.

Real gross domestic product fell 7.1 per cent in the December 2025 quarter, following growth of 5.1 per cent in the September quarter. BOJ said the contraction was broad-based, with the largest declines in mining and quarrying, accommodation and food service, electricity and water, agriculture, and manufacturing.

For the March 2026 quarter, the central bank estimated a further contraction of 4.0 to 6.0 per cent, although at a slower pace as agriculture improved and electricity restoration continued after Hurricane Melissa.

Normally, weak growth would increase pressure for cheaper money but BOJ is also watching inflation and the foreign exchange market.

That helps explain why the Monetary Policy Committee held the policy rate at 5.50 per cent in May and continued special measures to preserve stability in the foreign exchange market, including directly supplying foreign currency to selected entities in the energy sector.

For borrowers, the message is straightforward: A weak economy does not guarantee quick relief on loan rates.

For savers and investors, returns on deposits, Treasury bills, and other short-term instruments will continue to be shaped by BOJ’s balancing act between inflation, growth, and the exchange rate.

Byles also used his closing statement to point to wider institutional gains during his tenure.

Among the most commercially important was Jamaica’s removal from the Financial Action Task Force Grey List in 2024. For banks and businesses, that helped reduce a reputational burden that can affect correspondent banking relationships, international payments, trade finance, and the ease of doing cross-border business.

Byles also cited more than $50 billion in dividends paid by BOJ to the Ministry of Finance over seven years, the introduction of polymer banknotes, progress on JAM-DEX, work on an electronic know-your-customer framework, and advancement of the Twin Peaks supervisory model.

He also said Jamaica had no bank failures during his tenure, despite major international disruptions.

Byles’ closing message was therefore not only about what BOJ survived, it was also about what comes next.

The next governor will take over a central bank with stronger reserves, a stable banking system, and greater institutional independence. But the job will begin with inflation pressure rising again, the economy still recovering, external accounts under strain, and a banking market that limits how quickly policy changes reach households and businesses.

Byles used his final Parliament appearance to argue that BOJ held steady through a turbulent period. His successor will have to prove how well that stability can hold in the next one.