April 2, 2024
The Bank of Jamaica’s Monetary Policy Committee (MPC) opted to keep the policy interest rate at 7.0%, maintain relative stability in the foreign exchange market, and uphold tight Jamaican dollar liquidity conditions during its meetings on March 26 and 27, 2024. This decision stemmed from Jamaica’s headline inflation, which at 6.2% in February 2024, although moderating compared to previous months, remained above the Bank’s target range of 4.0% to 6.0%. Core inflation stood at 6.1% in February 2024, lower than the previous year’s 6.6%. Notably, the elevated headline inflation was attributed mainly to the impact of increased public passenger vehicle (PPV) fares and widespread wage hikes.
While global factors such as declining international commodity prices and stable exchange rates provided positive macroeconomic drivers, inflation is forecasted to exceed the target range from March 2024 to June 2025 due to ongoing and anticipated PPV fare increases. However, without these fare hikes, inflation would likely fall within the target range for most of 2024. Risks to the inflation outlook are balanced, with potential upside risks stemming from second-round effects of fare increases, higher wage adjustments, and supply chain disruptions, while downside risks include weaker global growth leading to reduced domestic demand.
Future monetary policy decisions will hinge on incoming data regarding these risks, with the MPC committed to closely monitoring inflation dynamics and prepared to adjust interest rates further if upside risks materialize.
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