Publication date: 5 October 2017 | Covering: September 2017
Monthly Briefing
- Fed September 19–20: Holds 1.00–1.25% (FRESH); announces balance sheet normalization begins October; December hike signalled
- Hurricane Irma: Category 5 hits Caribbean September 6–8, Florida September 10; massive destruction
- Hurricane Maria: Category 5 devastates Puerto Rico September 20; grid destroyed; humanitarian crisis
- North Korea hydrogen bomb test September 3; ICBM tests; UN Security Council tightens sanctions
- US employment solid through September; manufacturing ISM strong; global growth synchronised
- BOJ easing; Jamaica spared worst of hurricane season; NHT J$6.5 million ceiling; rates 0, 2, 4 per cent
Fed Holds and Announces Historic Balance Sheet Decision
Sixteen days before this edition, the Federal Open Market Committee held the federal funds rate steady at 1.00 to 1.25 per cent at its September 19 to 20 meeting, but the headline was not the rate decision — it was the formal announcement that the Federal Reserve’s balance sheet normalization programme would begin in October. The programme, which the FOMC had been communicating for months, involves the gradual reduction of the Fed’s US$4.5 trillion balance sheet by allowing maturing securities to roll off rather than being reinvested. Initial monthly caps of US$10 billion would increase quarterly over the course of twelve months until reaching a maximum of US$50 billion per month. The announcement was the most significant Federal Reserve balance sheet decision since the quantitative easing programmes began in 2008, effectively beginning the unwinding of a decade of unconventional monetary policy. The FOMC also maintained its projection of one more rate hike in 2017 (December) and three hikes in 2018, signalling continued confidence in the expansion despite the hurricane season disruption.
A Catastrophic Hurricane Season in the Caribbean
September 2017 brought an extraordinary series of catastrophic hurricanes to the Caribbean and the southern United States. Hurricane Irma — the most powerful Atlantic hurricane ever measured on record, with sustained winds of 185 miles per hour for 37 consecutive hours — struck the northern Caribbean islands between 6 and 8 September, destroying large portions of Barbuda, Saint Martin, Saint Barthelemy, the Virgin Islands, and Turks and Caicos, before making two landfalls in Florida on 10 September. The economic damage across the Caribbean and Florida was enormous. Hurricane Maria followed on 20 September, striking Dominica as a Category 5 storm and then Puerto Rico with catastrophic effect: the island’s entire electrical grid was destroyed, and the humanitarian situation was deeply serious, with millions without power for months. The 2017 hurricane season was the costliest in US history, with total damage exceeding US$200 billion.
Jamaica was spared direct strikes by the 2017 storms, but the destruction of Caribbean neighbour economies and tourism infrastructure was deeply concerning. The Caribbean’s reputation as a safe and desirable destination was affected by the widespread media coverage of the destruction, and the loss of tourism capacity in affected islands had implications for regional visitor flows. Jamaica’s own tourism product was intact, and the island had an opportunity to attract visitors displaced from affected destinations, but the overall regional atmosphere required careful management of perceptions and marketing.
Jamaica’s Mortgage Market Through September
Jamaica’s residential mortgage market maintained constructive operating conditions through September 2017. The Bank of Jamaica’s progressive monetary easing through the year had improved the domestic rate environment for credit, and the NHT’s J$6.5 million individual ceiling and 0 to 4 per cent subsidised rates provided the foundation for affordable home ownership. Commercial bank mortgage competition remained active, and housing demand — supported by urbanisation, household formation, and diaspora investment — continued to outpace supply in key markets. Jamaica’s fiscal consolidation programme remained on track, providing the macroeconomic stability that supported the mortgage market’s healthy functioning.
Looking Ahead
The commencement of Federal Reserve balance sheet normalization in October represents a structural shift in the global monetary environment, though the pace is designed to be gradual and its direct market impact is expected to be limited. The December Fed hike remains the next anticipated rate event. For Jamaica, the hurricane season’s regional economic impact and any effect on Caribbean tourism perceptions entering the winter season are the most immediate external concerns. The island’s domestic policy momentum provides a positive counterweight to these challenges.
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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