The Bank of Jamaica (BOJ) has issued a stark warning to households and businesses, urging them to prepare for a significant rise in inflation driven by the aftermath of Hurricane Melissa. The central bank projects that inflation will exceed its target range of four to six per cent in the near term, with price stability not expected to return until 2027. This comes despite Jamaica enjoying relatively low inflation below six per cent over the past two years, as reported by the Statistical Institute of Jamaica (Statin).
Hurricane Melissa, a Category 5 storm that struck Jamaica’s south-western coast on October 28, has caused extensive economic disruption, damaging infrastructure and disrupting productive activities. The BOJ anticipates that annual headline inflation will rise sharply from 2.9 per cent in October 2025, with core inflation—excluding volatile food and fuel prices—also breaching the target range by mid-2026. This inflationary pressure is expected to ripple across various sectors, including food, utilities, transport, and personal care services.
Early signs of inflation are already evident in the October Consumer Price Index (CPI), which recorded a 1.5 per cent increase in food prices, driven by significant surges in vegetables, tubers, and pulses. Electricity costs also rose, contributing to a 0.8 per cent increase in housing-related expenses. The government’s decision to temporarily suspend fiscal rules to fund relief and reconstruction efforts is expected to inject more money into the economy, further exacerbating inflationary pressures.
In response, the BOJ has adopted a cautious approach, maintaining its key interest rate at 5.75 per cent while implementing measures to stabilise the foreign exchange market. The central bank has already sold US$210 million to the market since the hurricane and plans to provide foreign currency directly to energy sector entities. These steps aim to prevent a depreciating Jamaican dollar from worsening inflation by increasing the cost of critical imports for reconstruction.
The BOJ remains committed to its inflation target and is prepared to adjust its monetary policy stance if inflationary risks escalate further. The next policy decision announcement is scheduled for December 18, 2025, as the central bank continues to monitor price movements closely.