JAMAICAN businesses expect inflation to remain above the Bank of Jamaica’s (BOJ’s) target over the next year, even as confidence about the economic outlook improves, according to the central bank’s latest survey.

Businesses forecast inflation of 6.7 per cent over the next 12 months, down from 7.0 per cent in the previous survey but still above the upper end of the BOJ’s target range of 4.0 per cent to 6.0 per cent.

The findings point to a mixed outlook in which companies expect some easing in price pressures but remain concerned about the cost of replacing stock, utilities, fuel and transportation.

The survey was conducted by the Statistical Institute of Jamaica on behalf of the BOJ between June 10 and July 9 and covered 338 respondents, including chief executive officers, managing directors and financial controllers.

It was completed before the release of Jamaica’s July inflation figure, which rose to 7.5 per cent from 6.7 per cent in June.

Respondents projected point-to-point inflation of 6.3 per cent at December 2026. That would be lower than both the June and July outturns but would remain above the BOJ’s target range.

The survey does not represent the BOJ’s own inflation forecast. It measures what business leaders expect to happen to prices, the exchange rate, interest rates and economic conditions.

Those expectations matter to the central bank because they can influence pricing, wage negotiations and other business decisions. In its August monetary policy assessment, the BOJ identified a rise in inflation expectations as one of the factors that could push inflation above its forecast.

Businesses’ perception of how well inflation was being controlled also deteriorated in June, despite the reduction in their 12-month forecast.

The BOJ said the decline reflected a smaller proportion of respondents being satisfied with the way inflation was being controlled by the Government.

The survey provides some indication of where businesses expect the strongest cost increases to occur.

Stock replacement was identified by 33.4 per cent of respondents as the input likely to record the largest price increase over the next 12 months, up from 32.8 per cent in the May survey.

Utilities followed at 22.2 per cent, while 19.5 per cent selected fuel and transportation. Raw materials were identified by 16.6 per cent of respondents and wages and salaries by 7.7 per cent.

The results suggest that businesses are more concerned about the cost of goods, energy and transportation than labour expenses as sources of pressure over the coming year.

Companies also expect the Jamaican dollar to weaken slightly over the next 12 months.

Respondents projected depreciation of 0.9 per cent over the following three months, compared with 0.8 per cent in the May survey. The expected depreciation over six months increased to 1.3 per cent from 1.1 per cent, while the 12-month forecast rose to 1.7 per cent from 1.4 per cent.

Exchange-rate expectations are important to the inflation outlook because changes in the value of the Jamaican dollar can affect the local cost of imported goods and services.

On interest rates, the largest share of businesses expected the BOJ to hold its policy rate unchanged over the following three months. That view was held by 49.1 per cent of all respondents, up from 48.4 per cent in May.

Among respondents from the financial sector, 70.4 per cent expected the rate to remain unchanged, while 18.5 per cent expected it to be marginally higher. The policy rate referenced in the survey was 5.50 per cent.

The BOJ subsequently kept the rate at 5.50 per cent in August, saying current inflation pressures appeared to be driven mainly by temporary external and administrative factors. The central bank said it remained prepared to act if higher inflation became more persistent.

Businesses expected the yield on the Government’s 90-day Treasury bill to average 6.0 per cent three months ahead, above the June outturn of 5.6 per cent. Financial-sector respondents forecast a lower rate of 5.4 per cent.

Despite their concern about inflation and costs, businesses became more positive about the economy.

The Present Business Conditions Index increased to 66.5 from 60.1. Although that represented an improvement, the index remained below 100, meaning more respondents viewed current conditions as worse than a year earlier than viewed them as better.

The Future Business Conditions Index rose to 124.2 from 113.4. A reading above 100 means more respondents expect conditions to improve over the next year than expect them to worsen.

The two readings show that businesses remain dissatisfied with present conditions but have become more optimistic about the year ahead.

The BOJ, in its August Quarterly Monetary Policy Report, projected average headline inflation of between 5.4 per cent and 6.4 per cent over the next eight quarters, compared with a wider range of 5.3 per cent to 7.4 per cent in its previous forecast.

The central bank said inflation would remain above its target during the September quarter before moderating towards the range over the near term.

It said the outlook remained uncertain, with risks tilted towards higher inflation. Those risks include a prolonged conflict in the Middle East, further escalation of the Russia-Ukraine war, higher international commodity prices, rising inflation expectations, stronger-than-anticipated domestic spending, and an extended drought.