Publication date: 5 April 2018 | Covering: March 2018
Monthly Briefing
- Fed March 20–21: First hike of 2018 to 1.50–1.75%; Powell’s first FOMC meeting as Chair; three hikes projected for 2018
- Trump signs steel (25%) and aluminum (10%) tariffs March 8; global trading partners alarmed
- Section 301 China tariffs announced March 22: US$60bn in Chinese goods targeted
- UK Salisbury poisoning March 4: Skripal affair; Russia tensions; coordinated expulsions
- Global equity markets volatile through March; S&P 500 falls on trade war fears
- BOJ rate steady; Jamaica IMF programme advancing; NHT J$6.5 million ceiling; rates 0, 2, 4 per cent
Powell’s First Hike and a Confident FOMC
The Federal Open Market Committee raised the federal funds rate by 25 basis points at its March 20 to 21 meeting, lifting the target range to 1.50 to 1.75 per cent. The move was the first rate decision presided over by new Federal Reserve Chair Jerome Powell, who had taken office on 5 February following Janet Yellen’s departure. The hike was universally expected, and Powell’s first press conference was closely watched for signals of continuity or change in the FOMC’s approach. The new Chair maintained the “gradual” tightening guidance of his predecessor, affirming that the FOMC saw three total hikes in 2018 as the appropriate path, with a fourth possible but not the central expectation. The Summary of Economic Projections revised up the growth forecast for 2018 — reflecting the December 2017 tax reform’s expected fiscal stimulus — and maintained a long-run neutral rate projection of around 3 per cent. For global markets, Powell’s debut was judged a smooth transition, maintaining Yellen-era gradualism while projecting confidence in the expansion’s durability.
Steel Tariffs, Section 301, and the Opening of Trade War
President Trump signed proclamations on 8 March imposing 25 per cent tariffs on steel imports and 10 per cent tariffs on aluminum imports under Section 232 of the Trade Expansion Act, which permits tariffs on national security grounds. The tariffs applied globally, with initial exemptions granted to Canada, Mexico, the EU, Australia, Argentina, Brazil, and South Korea — exemptions that were subsequently removed or renegotiated. The steel and aluminum action was followed almost immediately by a further and more consequential measure: on 22 March, the United States announced the findings of a Section 301 investigation into China’s intellectual property and technology transfer practices, with the recommendation of tariffs on approximately US$60 billion of Chinese goods. The Section 301 announcement was the opening act of the US-China trade conflict that would dominate global market attention for the remainder of 2018 and beyond. China announced retaliatory tariffs on US$3 billion of US goods in response to the steel and aluminum action, signalling its willingness to retaliate in kind.
The Salisbury Poisoning and Geopolitical Tensions
On 4 March, former Russian spy Sergei Skripal and his daughter Yulia were found incapacitated in the English city of Salisbury after being poisoned with a military-grade nerve agent, Novichok. The United Kingdom attributed the attack to the Russian government, and the incident produced a significant diplomatic crisis: more than twenty countries expelled Russian diplomats in solidarity with the UK, in the largest coordinated expulsion since the Cold War. Russia denied responsibility and expelled diplomats in return. The episode heightened already-elevated tensions between Russia and the West over Ukraine, and added a new source of geopolitical risk to an already uncertain global environment. Financial market impact was limited, but the deterioration in Russia-Western relations had implications for European energy supply security and broader geopolitical stability.
Jamaica’s Mortgage Market Through March
Jamaica’s mortgage market entered the second quarter of 2018 in stable domestic conditions, supported by the Bank of Jamaica’s monetary policy framework and the NHT’s sustained affordable lending programme. The NHT’s J$6.5 million individual ceiling and subsidised 0 to 4 per cent rate structure continued to provide the primary accessible mortgage option for contributing Jamaicans. Commercial banks and building societies maintained active mortgage origination, and the improving fiscal outlook — with Jamaica’s debt-to-GDP ratio declining steadily through programme implementation — was gradually reducing the domestic sovereign risk premium that had historically weighed on borrowing costs. The global trade war opening was a relevant external risk, but its near-term transmission to Jamaican credit conditions was indirect and limited.
Looking Ahead
The trajectory of the US-China trade dispute will be the dominant external variable through the second quarter, with the actual tariff implementation and China’s response the critical events to watch. The Federal Reserve’s May 1 to 2 meeting holds no rate change, with the next hike anticipated at June’s meeting. For Jamaica, the combination of the global trade policy uncertainty and the ongoing adjustment to higher US rates requires vigilance about external financing conditions, even as the domestic policy framework provides meaningful insulation.
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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