Publication date: 5 August 2020 | Covering: July 2020
Monthly Briefing
- US summer COVID surge: July produces record daily case counts in southern and western states
- Fed June 9–10 holds 0.00–0.25%; date-based forward guidance; full QE; Jackson Hole upcoming August 27
- US economic recovery stalls in July as summer surge forces renewed closures; unemployment stubbornly high
- Jamaica international borders reopened June 15; tourism volumes minimal; COVID protocols in effect
- BOJ pandemic-era low overnight rate; NHT ceiling J$6.5 million; rates 0, 2, 4 per cent
- Jamaica election campaign underway; Holness government seeking re-election September 3
US Summer Surge: A Setback to Recovery
July 2020 produced a severe and alarming COVID-19 surge in the United States, driven primarily by the southern and western states that had moved fastest to reopen in May and June. Florida, Texas, Arizona, and California recorded daily case counts far exceeding their spring peaks, with Florida at one point recording nearly 15,000 new cases in a single day. The surge forced these states to reimpose restrictions, close bars and restaurants, and in some cases reverse reopening measures. Hospitalisations in affected states climbed sharply, and healthcare capacity came under pressure. The human cost was severe, with US daily deaths rising through July toward levels last seen at the pandemic’s spring peak.
The summer surge had significant economic consequences. Retail foot traffic fell, consumer confidence declined, and the strong June recovery in employment and activity moderated. The US unemployment rate, which had fallen sharply from the April peak of nearly 15 per cent to around 11 per cent in June, faced renewed headwinds as activity retrenched in the hardest-hit states. The July experience reinforced the pandemic’s essential dynamic for economic forecasters: without effective control of the virus, the economic recovery could not be durable. For Jamaica, the US summer surge directly threatened the tourism recovery that had been hoped for through the second half of 2020, reducing the likelihood of meaningful US visitor arrivals until source market conditions improved.
Federal Reserve: Committed to Full Accommodation
The Federal Open Market Committee held the federal funds rate at 0.00 to 0.25 per cent at its June 9 to 10, 2020 meeting and provided updated forward guidance indicating that the FOMC expected to maintain this rate “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” The Committee also published updated economic projections showing the median participant projecting rates near zero through the end of 2022. The June meeting maintained the full package of emergency measures deployed since March — zero rates, large-scale asset purchases, and emergency lending facilities — while providing more formal structure to the forward guidance.
The Federal Reserve’s annual Jackson Hole Economic Symposium is scheduled for late August, and there is significant market expectation that Chair Powell will use the occasion to announce a review of the Fed’s monetary policy framework and potentially unveil a new approach to inflation targeting. The outcomes of that deliberation will influence the Fed’s guidance for rates and asset purchases going forward. For Jamaica’s mortgage market, the Fed’s maintained commitment to near-zero rates provides continued support for the global financing conditions that underpin the BOJ’s own accommodative stance and Jamaica’s commercial mortgage market.
Jamaica Borders Open: Tourism Hopes and Reality
Jamaica reopened its international borders to tourists on 15 June 2020, one of the earlier reopening decisions among Caribbean destinations. The government implemented a resilient corridor model, requiring arriving tourists to stay within designated resort areas and comply with testing and health protocols, as the framework for welcoming visitors while managing COVID transmission risk. The early reopening was a necessary step for the tourism-dependent economy, but the practical reality of July 2020 was that visitor volumes remained at a fraction of pre-pandemic levels. The combination of travel hesitancy, COVID restrictions in source markets, reduced airline capacity, and the summer US surge all constrained actual arrivals. The economy remained in deep COVID-related contraction, with GDP tracking one of its worst annual performances in decades.
In the mortgage market, the Bank of Jamaica’s emergency low overnight rate and the active NHT programme with its J$6.5 million individual ceiling and 0, 2, and 4 per cent rates continued to support housing demand. Some property market participants had taken advantage of the low-rate environment and COVID-period price adjustments to make purchases, and the structural demand for Jamaican residential property — driven by household formation, diaspora purchasing, and remittance-backed acquisitions — remained present even amid the economic uncertainty.
Jamaica Election Season
Jamaica’s political landscape in July 2020 was shaped by the approach of a constitutionally required general election, with the Holness government’s parliamentary term expiring in February 2021. Speculation about the election date was intense, and the government’s handling of the pandemic had become a central electoral issue. The economic impacts of COVID, the management of tourism, and the government’s support programmes were all elements of the developing electoral debate. Property market participants were watching the election outlook, as any change in government would have implications for housing policy, NHT governance, and the broader economic management approach.
Looking Ahead
The Jackson Hole symposium on 27 August is the dominant upcoming monetary policy event, with markets expecting a significant framework announcement from the Fed. The Federal Reserve’s July 28 to 29 meeting outcome — which will have been published just before this edition — will provide the interim policy read. For Jamaica, the election date decision and the trajectory of the US COVID surge will be the key near-term developments, with both having direct implications for the economic and property market outlook.
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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