Publication date: 5 July 2019 | Covering: June 2019
Monthly Briefing
- Fed June 18–19: Holds steady but makes decisive dovish pivot; drops “patient” language; signals July cut imminent
- G20 Osaka June 28–29: Trump and Xi agree trade truce; new tariffs paused; US-China talks to resume
- Global markets rally sharply through June; S&P 500 posts best June in decades on rate cut expectations
- US growth solid; labour market strong despite soft May payrolls; consumer confidence high
- BOJ monetary policy steady; Jamaica IMF programme on track; external accounts improving
- NHT individual ceiling J$6.5 million; rates 0, 2, 4 per cent; summer residential market active
The Federal Reserve’s Decisive Dovish Pivot
The Federal Open Market Committee held the federal funds rate unchanged at its June 18 to 19 meeting, keeping the target range at 2.25 to 2.50 per cent. But the hold was accompanied by a significant shift in the FOMC’s communication framework. The Committee dropped the word “patient” from its statement — the phrase that had guided the FOMC’s stance since the January pivot — and replaced it with language stating that the Committee “will act as appropriate to sustain the expansion”, widely interpreted as a clear signal that rate cuts were coming. Critically, eight of seventeen FOMC members indicated in the Summary of Economic Projections that they expected a rate reduction in 2019, with seven expecting two cuts. Chair Powell stated that “cross-currents” from trade policy and slowing global growth had created uncertainty that “weigh on the outlook”.
Markets interpreted the June meeting as a near-certain signal of a July cut. Federal funds futures markets moved to price in an approximately 100 per cent probability of a 25 basis point cut at the July 30 to 31 FOMC meeting, with significant probability assigned to a 50 basis point move. The shift in market expectations drove a sharp rally in US equities and bonds through the second half of June, with the S&P 500 posting its strongest June performance in decades. For Jamaica’s mortgage market, the prospect of a Fed easing cycle was a materially positive external development, with implications for the direction of international borrowing costs and the cost of US dollar-denominated finance.
G20 Osaka Trade Truce
The month of June concluded with a significant de-escalation in the US-China trade war. At the G20 Leaders’ Summit in Osaka on 28 to 29 June, Presidents Trump and Xi met in a bilateral session and agreed to a resumption of trade negotiations, with the United States agreeing to pause the imposition of further tariffs on Chinese goods while talks proceed. The United States also agreed to ease restrictions on US company sales to Huawei Technologies, which had been placed on an export control blacklist in May, allowing case-by-case approvals of component sales to the Chinese technology group. Markets responded positively to the Osaka outcomes, with risk assets rising on the first trading day of July.
The trade truce provided genuine relief from the escalatory cycle that had characterised 2018 and the early months of 2019. However, experienced trade watchers cautioned that the Osaka meeting addressed neither the structural issues — technology transfer, state subsidies, intellectual property enforcement, and market access — that defined the US position, nor the timeline for any comprehensive deal. The truce bought time for negotiations to resume, but the gap between the two sides on core issues remained substantial, and previous ceasefires in the trade dispute had not produced durable progress. For Jamaica, the short-term benefit of reduced global financial market stress and an improved external growth outlook was welcome, even if the medium-term durability of the truce remained an open question.
Jamaica’s Mortgage Market Through June
Jamaica’s residential mortgage market continued to perform well through June 2019. The combination of Bank of Jamaica monetary policy stability, strong NHT lending activity, and competitive commercial bank and building society offerings kept the mortgage market accessible and active. The NHT’s J$6.5 million individual ceiling and subsidised rate structure — spanning 0 to 4 per cent depending on income band — remained the primary vehicle for affordable residential finance for the contributor population. The summer months typically see a seasonal uptick in property search and purchase activity, and the first-half momentum in the housing market provided a positive foundation entering July.
Jamaica’s IMF programme remained on track through the midyear point, with the fiscal discipline and structural reform agenda that had delivered sustained macro-financial improvements continuing to support the investment climate. The external sector benefited from robust tourism arrivals and diaspora remittance flows, both of which were supported by US economic resilience. The Fed’s signalled easing, and the temporary resolution of trade tensions at G20 Osaka, improved the near-term outlook for global growth and therefore for Jamaica’s key external revenue streams.
Looking Ahead
All attention now turns to the Federal Reserve’s July 30 to 31 meeting, where a 25 basis point cut to 2.00 to 2.25 per cent is almost universally expected. Whether Chair Powell characterises the move as the beginning of a sustained easing cycle or a one-off mid-cycle adjustment will be the key question shaping market sentiment for the remainder of 2019. The G20 Osaka trade truce will also be tested as US and Chinese negotiators return to the table: the September tariff deadlines provide the next hard marker for whether de-escalation produces a genuine agreement or another pause before renewed confrontation. For Jamaica, the summer months will provide further data on tourism performance, remittance trends, and the fiscal accounts before the IMF’s next programme review.
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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