Publication date: 5 October 2004 | Covering: July – September 2004
Quarterly Briefing
- Fed hiking starts: June 30 to 1.25%; August 10 to 1.50%; September 21 to 1.75%; first rate hikes since 2000; Fed normalising from 1% historic low
- US election: Kerry vs Bush November battle; Kerry winning Democratic nomination; economy and Iraq the central issues; polls tight
- Oil rising: Crude approaches US$50/barrel; China demand; Iraq supply disruption; geopolitical risk; US petrol prices at new highs
- Athens Olympics: August 13–29; Greece hosts successfully; security concerns pre-games; smooth execution; 202 nations; landmark sporting event
- Beslan siege: September 1–3 North Ossetia school siege by Chechen militants; 334 killed including 186 children; catastrophic terrorism; Russia hardens security posture
- Hurricane Ivan: September 10–11 (FRESH 25 days) Category 4 makes landfall Jamaica; catastrophic damage; also hits Grenada, Gulf Coast US
- US housing: Third consecutive year of strong appreciation; new home sales record; 30-year fixed rate around 5.875%; housing boom in full swing
- Jamaica: Ivan devastation; international assistance; BOJ managing exchange rate; NHT operations continuing
Hurricane Ivan Devastates Jamaica; Fed Begins Hiking
The third quarter of 2004 was dominated for Jamaica by the catastrophic impact of Hurricane Ivan. On 10–11 September, Hurricane Ivan — a Category 4 storm with maximum sustained winds of 130 mph — made landfall over Jamaica, causing the most severe hurricane damage the island had experienced in decades. Buildings were destroyed across the island, particularly in the western parishes; roofs were lost on thousands of homes; roads, bridges, and infrastructure were damaged extensively; and the tourism sector suffered severe disruption as hotel properties were damaged and airlift capacity was reduced. Ivan also devastated Grenada (which suffered a direct Category 3 hit that destroyed 90% of buildings) and subsequently hit the US Gulf Coast. The international response included Caribbean CARICOM solidarity, assistance from Cuba, the UK, and bilateral donors. The economic cost to Jamaica ran into hundreds of millions of dollars. For the housing market, Ivan created an immediate reconstruction demand for building materials, skilled labour, and, ultimately, replacement housing finance — with the NHT responding to the disaster context as part of its broader mandate. The Federal Reserve, meanwhile, was beginning its normalisation: the June 30, August 10, and September 21 FOMC meetings each delivered 25 basis point hikes, raising the funds rate from 1% to 1.75% — the beginning of what would become seventeen consecutive increases over two years.
Athens Olympics; Beslan; Oil Approaching US$50
Greece successfully hosted the Summer Olympics from 13–29 August, a major logistical and security achievement given the pre-games anxieties about Greece’s readiness and the threat environment following the Madrid bombings of March 2004. The games drew 202 nations and passed off largely without serious incident. The quarter was also marked by one of the most horrific terrorist attacks since 9/11: on 1 September, Chechen militants seized a school in Beslan, North Ossetia, Russia, taking over 1,100 people hostage including 777 children. The three-day siege ended catastrophically on 3 September, with 334 people killed — of whom 186 were children — when security forces stormed the building. The atrocity led to a significant hardening of Russian security and counter-terrorism policy. Oil prices continued to rise through the quarter, approaching US$50 per barrel for the first time, driven by Chinese demand growth, supply disruptions in Iraq and Nigeria, and geopolitical risk premium.
Jamaica: Post-Ivan; Mortgage Conditions
In the immediate aftermath of Hurricane Ivan, Jamaica’s housing and mortgage market was defined by the scale of the reconstruction need. Thousands of homes required repair or replacement. The NHT’s subsidised mortgage programmes — at 0%, 2%, and 4% on loans up to J$6.5 million individually or J$13 million for two-applicant borrowings — were an important tool in the reconstruction, providing finance for rebuilding that commercial lenders at elevated rates could not economically supply to lower-income Jamaicans. The Bank of Jamaica maintained monetary stability through the crisis period, supporting the exchange rate and managing inflation. The broader economic impact of Ivan — lost tourism revenue, damaged production capacity, reconstruction costs — would weigh on Jamaica’s fiscal position and external accounts well into 2005.
Looking Ahead to Q4 2004
The US presidential election in November will dominate global political attention. Hurricane Ivan’s reconstruction in Jamaica and across the Caribbean will absorb significant resources and policy attention. The Fed’s hiking cycle continues, but with rates still below 2% the monetary stance remains historically accommodative. For Jamaica, the primary task is post-Ivan recovery while maintaining macroeconomic stability.
Mortgage & Housing Finance Disclaimer: This publication is for general information only and does not constitute mortgage, financial, legal or investment advice. Mortgage products, lending criteria, interest rates and borrowing costs vary between lenders and may change without notice. Readers should obtain independent advice from a qualified mortgage adviser, financial adviser or legal professional before making financial or property decisions.
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