Publication date: 5 August 2017 | Covering: July 2017
Monthly Briefing
- Fed July 25–26: Holds 1.00–1.25%; balance sheet normalization “relatively soon”; September announcement expected
- North Korea: ICBM test July 4 (Independence Day); second ICBM test July 28 — missiles now with range to reach continental US
- G20 Hamburg July 7–8: Trump–Putin first meeting; US isolated on Paris Climate Accord; trade communiqué acknowledges US dissent
- Republican healthcare repeal fails July 28: McCain casts decisive “no” vote; ACA repeal and replace abandoned
- US Q2 GDP 2.6%; global growth narrative strengthens; eurozone surging; Japan expanding
- BOJ maintains easing; Jamaica tourism and remittances solid; NHT J$6.5 million ceiling; rates 0, 2, 4 per cent
Fed Holds, Signals ‘Relatively Soon’ on Balance Sheet
The Federal Open Market Committee held the federal funds rate at 1.00 to 1.25 per cent at its meeting on 25 to 26 July, as was universally anticipated by markets. The July statement introduced a notable new formulation on the balance sheet: the Committee said it expected to begin implementing its balance sheet normalisation programme “relatively soon”, widely interpreted as signalling a September announcement. The phrase was new to the statement and represented a meaningful step towards confirming the timeline that Chair Yellen had described in general terms over the previous several months. The market reaction was minimal — a modest firming of short-term interest rates — reflecting the degree to which the balance sheet announcement had been well-telegraphed. Attention now turns to the Jackson Hole Economic Symposium on 24 to 26 August, where Yellen is scheduled to deliver the keynote address. September’s meeting on 19 to 20 September is the expected moment for the formal balance sheet announcement, with December the next most likely date for a rate increase. The US economic backdrop through July was generally positive: GDP growth in the second quarter came in at an annualised 2.6 per cent, stronger than the weather-affected 1.2 per cent of Q1 and consistent with a healthy underlying pace of expansion.
North Korea Escalation and Geopolitical Tensions
North Korea’s missile programme dominated geopolitical attention through July. On 4 July — coinciding with US Independence Day — Pyongyang test-fired what it claimed was its first intercontinental ballistic missile, the Hwasong-14. US and South Korean officials confirmed the test was of ICBM-class range. A second ICBM test on 28 July demonstrated further range, with analysts concluding that the weapon could potentially reach the continental United States. The tests triggered emergency sessions of the UN Security Council and sharp diplomatic exchanges between Washington and Pyongyang. The United States called on China to exert greater pressure on the North Korean regime. President Trump’s social media commentary was characteristically blunt, warning that US “patience is over”. For markets, the North Korean escalation was a source of periodic volatility but had yet to translate into sustained risk aversion, with global equities continuing their broadly upward trend. The potential for miscalculation in a high-stakes nuclear-armed standoff remained a source of concern for analysts and investors alike.
G20 Hamburg and the Republican Healthcare Collapse
The G20 summit in Hamburg on 7 to 8 July was notable on two fronts. The first and most anticipated event was the first face-to-face meeting between Presidents Trump and Putin, which lasted more than two hours in a bilateral session on the summit sidelines. Discussions included the 2016 US election interference allegations, Syria, and Ukraine, though specific outcomes remained opaque. More broadly, the G20 communiqué on trade managed to preserve language endorsing open trade while explicitly acknowledging the United States’ different position on climate change — the other 19 members reaffirming their commitment to the Paris Agreement as “irreversible”. The episode underscored the degree to which US withdrawal from multilateral frameworks was reshaping global diplomacy. On the domestic US political front, the effort to repeal and replace the Affordable Care Act collapsed dramatically on 28 July when Senator John McCain cast the decisive “no” vote against the “skinny repeal” bill, joined by Senators Susan Collins and Lisa Murkowski. The failure to pass any ACA replacement after seven years of Republican campaigning on the issue was a significant legislative setback for the Trump administration.
Jamaica Mortgage Market in July
Jamaica’s residential property and mortgage market continued its gradual recovery through July 2017. Tourism revenue and remittance inflows — the two primary foreign exchange earners — remained solid, supporting household incomes in the upper and middle segments of the mortgage market. The Bank of Jamaica’s easing monetary policy had brought commercial lending rates off their recent peaks, though lending rates remained elevated relative to NHT benchmark rates. The NHT’s J$6.5 million individual ceiling and tiered rates of 0, 2, and 4 per cent for qualifying applicants continued to define the affordable housing finance architecture, and NHT’s open schemes saw continued application activity. The broader regional context — a Caribbean tourism season that was performing well, with Jamaica’s hotel room capacity contributing to regional growth — provided a positive backdrop for property investment in the tourism corridor.
Looking Ahead
Jackson Hole on 24 to 26 August and the Fed’s September meeting are the immediate focal points for global interest rate watchers. Any indication from Yellen’s keynote of the precise September timing for the balance sheet announcement — and whether a December rate hike remains the central scenario — will be closely scrutinised. In the geopolitical sphere, North Korea’s escalating missile programme and the legislative gridlock in Washington both remain live risks capable of generating market volatility. For Jamaica, the approach of the peak Atlantic hurricane season through August and September is the principal near-term risk, with the property and tourism sectors most directly exposed. The mortgage market is expected to remain broadly stable, with NHT applications continuing at a healthy pace and commercial lenders cautiously competitive.
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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