September 29, 2026

The Bank of Jamaica’s Monetary Policy Committee voted unanimously to raise the policy rate by 50 basis points to 6.0 per cent, effective 29 September 2026, reversing the pause it held in August and signalling that the central bank now sees the risk of entrenched inflation as the more pressing danger. The decision was announced in a statement issued 28 September by MPC Chairman Brian Langrin, who noted that while August’s hold had been “appropriate based on the assessment of the risks at that time,” escalating geopolitical tensions and persistent commodity price pressures had since changed the calculus.

The move follows a third consecutive month of inflation running above the Bank’s target range. Headline inflation accelerated to 7.9 per cent in August, up from 7.5 per cent in July and a striking distance from the 1.2 per cent recorded a year earlier. Core inflation, which strips out the most volatile food and fuel components, held at 5.2 per cent for a second month but remained well above the 4.2 per cent of twelve months prior — a sign that price pressures have broadened beyond the initial supply shocks. The Committee attributed the deterioration primarily to drought-driven increases in agricultural prices and elevated international commodity prices feeding through to petrol at the pump.

Crucially, the Bank framed the hike as pre-emptive rather than corrective. The stated aim was to contain inflation and prevent “second-round effects” from becoming embedded in expectations — the point at which firms and households begin setting prices and wages on the assumption that high inflation is permanent. The Committee’s concern on this front is not abstract: business inflation expectations rose to 7.3 per cent in July, and the MPC flagged potential wage pressures alongside stronger-than-projected commodity pass-through as the dominant upside risks to its forecast. Taken together, the risk assessment leaned decisively to the upside.

On the outlook, the Bank projects that headline inflation will continue rising over the near term before returning to the target range by mid-2027. That projection carries an explicit caveat: it is contingent on the duration of the conflicts in the Middle East and between Russia and Ukraine. Should either drag on, core inflation in particular is expected to remain above target for longer. In effect, the Bank has published a forecast whose central assumption lies entirely outside its control, which goes some way to explaining the unanimity behind a tightening move at a time when growth is far from robust.

Domestic activity remains exposed on several fronts. The Committee pointed to continuing vulnerability from agricultural shocks, capacity constraints in tourism, and difficulties in mining. Against that backdrop, credit conditions have stayed comparatively firm: private sector credit expanded 7.9 per cent in July 2026, with personal lending up 8.3 per cent and business lending up 7.0 per cent. Whether that pace holds as the higher policy rate transmits through lending rates will be one of the clearer tests of the decision in the coming quarters.

The external picture offered the Bank some cover. International reserves remain robust, which the MPC expects to keep the exchange rate relatively stable. The Federal Reserve also raised its target range to 3.75–4.0 per cent in September, narrowing the interest rate differential and giving Jamaica a further reason to tighten in order to preserve the relative attractiveness of local currency assets and limit pressure on the Jamaica Dollar.

The next policy decision is scheduled for 18 November 2026. Markets will be watching the October and November inflation prints for evidence that the peak is in sight — and, equally, for any sign that core inflation is drifting higher rather than merely holding.