Publication date: 5 June 2017 | Covering: May 2017
Monthly Briefing
- Fed May 2–3: Holds 0.75–1.00%; notes Q1 GDP weakness as “transitory”; June hike remains firmly on table
- Macron elected French President May 7 with 66% majority; En Marche! defeats National Front; European relief
- Comey fired as FBI Director May 9; Russiagate investigations intensify; political turbulence in Washington
- WannaCry ransomware attack May 12: 200,000+ systems in 150 countries; NHS UK disrupted; global cybersecurity alarm
- US Q1 GDP 1.2% annualised; consumer spending weak; Fed sees as temporary weather-related
- BOJ easing; Jamaica growth improving modestly; NHT J$6.5 million ceiling; rates 0, 2, 4 per cent
Fed Holds; June Hike Firmly Expected
The Federal Open Market Committee held the federal funds rate at 0.75 to 1.00 per cent at its 2 to 3 May meeting, as the market had fully expected. The statement characterised the first-quarter GDP weakness — which came in at a disappointing 1.2 per cent annualised pace — as likely “transitory”, pointing to consumer spending that the Committee believed would pick up in subsequent quarters. The labour market assessment remained positive, with unemployment near historically low levels and payrolls continuing to advance at a solid monthly pace. There was no press conference at the May meeting, reducing the scope for policy guidance, but the market’s pricing for a June rate increase remained above 80 per cent. The question heading into June is not whether the Fed will raise rates but what it will say about the balance sheet programme that has been in preparation. Detailed guidance on the mechanics and likely start date of the reinvestment tapering process is expected alongside a June rate increase. Chair Yellen’s post-meeting press conference on 14 June will be scrutinised for that detail.
Macron’s French Victory Steadies Europe
The election of Emmanuel Macron as President of France on 7 May, with a commanding 66 per cent of the vote against Marine Le Pen’s National Front, was widely welcomed by European leaders and financial markets as a decisive repudiation of the Eurosceptic populist wave. Macron, a 39-year-old former investment banker and economy minister running under the banner of his newly formed En Marche! movement, had presented a pro-European, centrist programme that combined economic reform with European integration. His victory secured the immediate future of the eurozone and removed a major tail risk that had overhung European markets since the Brexit vote. German Chancellor Merkel was quick to congratulate Macron and signal a willingness to advance the Franco-German engine of European integration. For global financial markets, which had feared a Le Pen presidency and the prospect of a French exit from the euro, the result was a significant relief. European equities rallied and the euro strengthened on the news, reflective of the premium markets had been placing on the risk of a fundamentally disruptive French election outcome.
Comey Firing and Washington Political Turbulence
President Trump’s abrupt dismissal of FBI Director James Comey on 9 May plunged Washington into a political crisis that reverberated through the month. Comey had been leading the FBI’s investigation into Russian interference in the 2016 election and any potential coordination with the Trump campaign. The circumstances and timing of the firing — followed by the President’s statement in a television interview that he had the Russia investigation in mind when he made the decision — set off a firestorm of criticism and calls for an independent investigation. Within days, Deputy Attorney General Rod Rosenstein appointed former FBI Director Robert Mueller as Special Counsel, with a broad mandate to investigate Russian interference and related matters. Financial markets reacted with a brief but sharp sell-off — the S&P 500 fell more than 1 per cent on 17 May as political risk premiums rose momentarily — before recovering. The Mueller appointment was seen as reducing the immediate political pressure, but the special counsel’s investigation now represented a persistent political risk for the administration for the foreseeable future.
WannaCry and Global Cybersecurity
The WannaCry ransomware attack of 12 May was one of the most significant global cybersecurity events in recent memory. The malware, which exploited a vulnerability in older versions of Microsoft Windows, encrypted files on infected computers and demanded ransomware payment in Bitcoin. It spread to more than 200,000 systems in 150 countries within days, disrupting hospitals and medical services in the United Kingdom’s National Health Service, telecoms operators in Spain, car manufacturers in France and Germany, and logistics companies globally. The attack was attributed by multiple Western governments to North Korean state-sponsored actors. For financial institutions, including mortgage lenders and property registries, the event was a stark reminder of the systemic cybersecurity risks inherent in digital infrastructure. Jamaica’s financial sector had been investing in cybersecurity frameworks, and the WannaCry episode reinforced the urgency of that work.
Jamaica Mortgage Market in May
Jamaica’s mortgage market maintained its steady trajectory through May. The NHT’s J$6.5 million individual loan ceiling and tiered mortgage rates of 0, 2, and 4 per cent continued to define affordable housing finance access for qualified contributors. Commercial lenders were cautiously optimistic: the domestic economic outlook had improved modestly, with IMF and government projections pointing to growth approaching 1.5 to 2 per cent for fiscal 2017/18, supported by tourism, bauxite, and business process outsourcing. The Bank of Jamaica’s accommodative monetary policy was gradually feeding through to lending rates, though the transmission mechanism remained slow by international standards.
Looking Ahead
The Fed’s June 13 to 14 meeting is the central event for global interest rate markets over the coming weeks. A 25 basis point hike to 1.00 to 1.25 per cent is almost certain, and the balance sheet normalisation framework is expected to be announced. The French legislative elections in June will determine whether Macron can secure a parliamentary majority for his reform programme. In the UK, Prime Minister May called a snap general election for 8 June, and the outcome will shape the Brexit negotiating mandate. For Jamaica, the approaching hurricane season and the continued progress of the IMF economic programme remain the principal near-term considerations for the property and mortgage market.
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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