Publication date: 5 June 2020 | Covering: May 2020
Monthly Briefing
- US states begin phased reopening through May; economic activity recovering from April trough
- Fed April 28–29 holds 0.00–0.25%; expresses “substantial risks”; maintains all emergency measures
- George Floyd death May 25; protests emerging across United States; social and economic uncertainty
- Jamaica borders remain closed; government planning tourism reopening; COVID restrictions continuing
- BOJ pandemic-era low rate; NHT mortgage relief measures; housing demand sustained structurally
- NHT individual ceiling J$6.5 million; rates 0, 2, 4 per cent; contributor base resilience key
US Reopening: Cautious Steps Out of Lockdown
Through May 2020, US states began the phased process of reopening economic activity that had been restricted or closed during the peak COVID lockdown period of March and April. The approach varied significantly by state: some states moved aggressively to reopen retail, restaurants, gyms, and other service businesses as early as late April, while others maintained stricter restrictions pending clearer evidence of declining case trajectories. The federal government’s Opening Up America Again guidelines provided a three-phase framework that states could adapt to local conditions. The practical effect was a highly uneven national reopening in which the pace of activity recovery depended heavily on the policy choices and COVID trajectories of individual states and localities.
The economic data for May began to show tentative improvement from the extraordinary April trough. US retail sales rebounded sharply in May as restrictions lifted and fiscal stimulus payments reached households. Importantly, as this edition goes to press, the US Bureau of Labor Statistics has released the May employment report, which shows a surprising gain of approximately 2.5 million jobs — dramatically exceeding expectations of a further decline and suggesting the labour market recovery is beginning earlier than most forecasters anticipated. This data point, received today, is a significant positive signal for the near-term US economic outlook, with implications for the remittance and tourism-dependent Jamaican economy.
Federal Reserve April Meeting: All Emergency Measures Maintained
The Federal Open Market Committee held the federal funds rate at 0.00 to 0.25 per cent at its April 28 to 29, 2020 meeting and maintained all emergency monetary policy and financial stability measures deployed since mid-March. The post-meeting statement expressed that the pandemic was “posing tremendous human and economic hardship across the United States and around the world,” and noted that the FOMC had identified “substantial risks to the economic outlook over the medium term.” Chair Powell’s press conference — conducted by teleconference — emphasised the uncertainty of the situation and the Fed’s readiness to use additional tools if necessary. The April meeting provided no new policy actions but confirmed the continuation of the extraordinary support framework.
The scope of the Federal Reserve’s emergency response by this point was unprecedented in scale. In addition to the emergency rate cuts of 3 March and 15 March, the Fed had committed to unlimited asset purchases of Treasuries and agency MBS, established emergency lending facilities for commercial paper, money market funds, primary dealers, and corporate bonds, expanded its dollar swap lines with foreign central banks, and established the Main Street Lending Program to support medium-sized businesses. The combined effect was to preserve the functioning of the US and global financial system through one of the most acute stress periods since the 2008 financial crisis. For Jamaica, the Fed’s aggressive action prevented the pandemic shock from becoming a financial crisis on top of an economic one, stabilising the global financing conditions on which Jamaica depends.
Jamaica: Planning for Reopening
Jamaica’s international borders remained closed through May 2020, with the government maintaining restrictions introduced during the pandemic emergency period. The government announced plans for a phased reopening of the tourism sector, with a target of 15 June for the resumption of commercial flights and the implementation of the resilient corridor model. The planning process involved extensive consultation with the tourism industry, health authorities, and international partners, given the importance of getting the reopening protocols right both to protect public health and to restore confidence among potential visitors. The government’s CARE programme — providing income support to individuals in affected sectors, including tourism — was being extended to cover the continued closure period.
In the mortgage market, the National Housing Trust implemented COVID-related relief measures for contributors experiencing financial difficulty due to the pandemic, including deferred payment options and restructuring facilities. The NHT’s J$6.5 million individual loan ceiling and subsidised rates of 0, 2, and 4 per cent provided ongoing support for the affordable housing segment. The Bank of Jamaica’s pandemic-era low overnight rate and associated accommodations created the most favourable rate environment for mortgage borrowing in Jamaica’s recent history, even as the economic environment created uncertainty about borrower capacity to take on new commitments.
Looking Ahead
Jamaica’s planned border reopening on 15 June is the most significant near-term domestic economic event, representing the beginning of the path to tourism recovery. The Fed’s June 9 to 10 meeting will be the first to include updated economic projections since the pandemic began, and will provide the FOMC’s formal assessment of the economic outlook. The trajectory of US reopening and any second-wave COVID risk will be the critical variables for Jamaica’s summer tourism outlook and, by extension, the broader economic recovery.
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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