Publication date: 5 September 2017 | Covering: August 2017
Monthly Briefing
- Jackson Hole August 24–26: Yellen focuses on financial stability regulation; no new rate signal; balance sheet “relatively soon”
- Hurricane Harvey makes landfall Texas August 25; catastrophic flooding; economic damage US$125bn+
- North Korea fires ballistic missile over Japan August 29; UN Security Council emergency session
- Fed July 25–26: Holds 1.00–1.25%; notes balance sheet normalization “relatively soon”
- Global markets broadly calm; low volatility; strong synchronised global growth backdrop
- BOJ easing; Jamaica economic growth accelerating; NHT J$6.5 million ceiling; rates 0, 2, 4 per cent
Jackson Hole and Harvey: A Month of Contrasts
The Federal Reserve’s annual Jackson Hole Economic Symposium on 24 to 26 August 2017 was the major monetary policy event of the month, though Chair Yellen’s keynote address — titled “Financial Stability a Decade after the Onset of the Crisis” — was notably focused on the post-crisis regulatory framework rather than the near-term rate or balance sheet outlook. Yellen defended the post-2008 regulatory reforms that had strengthened bank capital requirements and liquidity standards, pushing back against arguments for significant regulatory rollback. On monetary policy, she offered little new signal, maintaining the FOMC’s existing guidance that balance sheet normalization would begin “relatively soon” and that rates would continue rising gradually. The July 25 to 26 FOMC meeting had already held rates steady and reiterated the balance sheet timeline. Markets interpreted Jackson Hole as a non-event on the monetary policy front, and the dollar and interest rates were little changed in response to Yellen’s remarks.
The month’s most significant domestic US event was the landfall of Hurricane Harvey on the Texas coast on 25 August, which produced catastrophic and unprecedented flooding in the Houston metropolitan area over the following days. Harvey stalled over the region and dropped more than 60 inches of rain in some locations — the largest rainfall total from a tropical cyclone in US history. The human and economic toll was enormous: more than 100 deaths, hundreds of thousands of homes flooded, and economic damage estimated at more than US$125 billion. The disruption to Gulf Coast energy infrastructure — including a significant portion of US refinery capacity — pushed gasoline prices higher temporarily. The hurricane was a human tragedy of the first order and a reminder of the physical climate risks that Caribbean and Gulf Coast economies face, including Jamaica’s vulnerability to severe weather events.
Jamaica’s Mortgage Market Through August
Jamaica’s residential mortgage market maintained its positive trajectory through August 2017. The Bank of Jamaica’s progressive monetary easing had reduced the domestic policy rate to levels more supportive of credit growth, and the NHT’s J$6.5 million individual ceiling and 0 to 4 per cent subsidised rates continued to anchor the affordable housing finance segment. The summer months generated the typical seasonal pattern of diaspora property interest and investment, with overseas-based Jamaicans using the period to research and advance property purchases. Jamaica’s fiscal performance remained on track, and the improving economic environment — with growth accelerating modestly from the low levels of recent years — supported mortgage market fundamentals.
Looking Ahead
Hurricane Irma, which formed in the Atlantic just before this edition, is now of immediate concern: its track toward the Caribbean and Florida has the potential to affect Jamaica directly or indirectly, and the regional tourism season preparation is being monitored closely. The Federal Reserve’s September 19 to 20 meeting will be the next major central bank event, with the formal announcement of the balance sheet normalization start date the most anticipated development. A December 2017 rate hike remains the base expectation. For Jamaica, the September meeting and the evolving hurricane season will be the twin focal points of external attention through the month.
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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