THE Bank of Jamaica (BOJ) says higher energy, transport and food costs have begun feeding into prices elsewhere in the economy, but the central bank is keeping its policy rate at 5.50 per cent as it continues to assess the initial inflation shocks as largely temporary.

Senior Deputy Governor Dr Wayne Robinson said Thursday that BOJ has detected second-round effects in services and processed foods, although the pass-through remains limited.

“Over the last two months, and particularly last month, we have seen some amount of second-round effects. It has started, but to date it’s still limited,” Robinson told BOJ’s Quarterly Monetary Policy Report press conference.

Second-round inflation occurs when an initial increase in costs, such as fuel, transport or food, begins spreading to other goods and services, making price pressures more persistent.

Bank of Jamaica Governor Dr Brian Langrin delivers his first Quarterly Monetary Policy Report briefing on Thursday, a day after formally taking office, as Senior Deputy Governor Dr Wayne Robinson looks on. BOJ officials said second-round inflation effects have begun to emerge while the policy rate remains at 5.50 per cent.

Headline inflation rose to 7.5 per cent in July from 6.7 per cent in June, marking a second consecutive month above BOJ’s four to six per cent target range. Core inflation, which excludes agricultural food and fuel prices, increased to 5.2 per cent from 5.0 per cent.

The Monetary Policy Committee (MPC) said higher taxi fares and the pass-through of elevated international commodity prices were among the main drivers of the July increase, while drought and hotter conditions pushed up agricultural prices.

BOJ expects inflation to remain above the upper limit of its target range during the September quarter. Robinson said inflation could continue to drift higher over the next three to four months before moderating towards year-end, with the rate expected to become more firmly established within the target range by the second half of 2027.

Against that backdrop, the MPC unanimously decided to keep the policy rate at 5.50 per cent following meetings on August 14 and 17, before Dr Brian Langrin formally took office as governor on Wednesday.

Facing the press for the first time as governor on Thursday, Langrin said he had been briefed on the deliberations and was satisfied that the decision was supported by the data and consistent with the BOJ’s mandate.

He said inflation remains a concern, but BOJ is “not alarmed”.

“So far, what we’ve had to deal with…are supply pressures, which we can’t reverse,” Langrin said. “But if it embeds into demand-fed inflation, then we’ll have to act.”

Whether BOJ is forced to act will depend partly on what happens to inflation expectations and how widely the current price shocks spread.

Robinson said expectations remain elevated but relatively contained.

“If these expectations start to rise very strongly, then that is also a basis on which we will have to act, and act very, very quickly,” he said.

Robinson expressed concern that rising inflation expectations, accompanied by a wider spread of second-round price increases, could make inflation more persistent.

“If those two forces collide, what you’re going to have is that overall inflation is then going to not only accelerate, but become persistent,” Robinson said.

Domestic factors are also adding to the inflation outlook.

BOJ has identified increased domestic spending associated with the post-Hurricane Melissa rebuilding programme as another source of pressure. The expansionary fiscal stance supporting reconstruction is contributing to domestic demand, while stronger-than-anticipated spending and prolonged drought could push inflation above current projections.

At the same time, the central bank expects real gross domestic product to grow between one and three per cent during financial year 2026/27, with risks to the forecast tilted to the downside.

Reconstruction is also expected to increase imports at a time of higher fuel and freight costs, leading BOJ to project some deterioration in the current-account balance.

Those pressures have so far occurred against a relatively stable foreign-exchange market. As at August 13, the Jamaican dollar was two per cent stronger than a year earlier. BOJ sold US$1.1 billion through its B-FXITT intervention mechanism over the 12 months to July, but purchased US$803.3 million more foreign currency than it sold overall. Gross international reserves stood at US$6.7 billion.

Asked whether the bank was relying on the exchange rate to help contain inflation while leaving its policy rate unchanged, Langrin rejected the suggestion that BOJ was targeting a particular value for the Jamaican dollar.

“The exchange rate is a floating one. We just want to manage volatility,” he said. “We don’t set exchange-rate targets.”

While Langrin signalled continuity on monetary policy, his first press conference also offered an early indication of where he wants to push further on financial-sector reform.

“There will be continuity,” he said, pointing to improvements in the monetary-policy framework and the resilience of the financial system over the past decade.

But modernising the financial system, improving payment infrastructure and “opening up competition in the banking sector” will also be priorities, he said.

Langrin said specialised technology institutions could help extend services to rural and underserved communities, and said banks should pass efficiency gains on to customers who remain poorly served by the formal financial system.

“We have no problems with banks making profits. The issue is they must pass on these efficiencies to the underserved for basic financial services,” he said.

The push comes against a banking structure in which two large institutions account for about 60 per cent of deposits and transactions, according to Robinson, who acknowledged that the concentration would not change quickly.

Rather than favouring individual institutions, BOJ is focusing on reducing barriers that make it difficult for customers to compare banks or move their business between them.

One part of that effort is a centralised electronic Know Your Customer, or e-KYC, utility designed to reduce repeated documentation when customers open accounts at different institutions and eventually make it easier to move deposit and loan relationships.

A pilot is targeted for the first half of 2027, followed by a wider roll-out.

BOJ is also developing an online comparison platform that will allow customers to review banking products, interest rates and services in one place. The platform had been targeted for launch in March 2026, but officials said Thursday that work was continuing with financial institutions and that the BOJ now hopes to launch it in the final quarter of this year.

“What you want them to be able to do is to be able to move their services from one commercial bank, from one financial product to another,” Robinson said.

BOJ officials cited the measures among steps being pursued to improve competition and strengthen the transmission of monetary policy.