Publication date: 5 November 2020 | Covering: October 2020
Monthly Briefing
- US election November 3: voting completed; Biden leading in key states; result still being determined
- US COVID second wave building sharply through October; Europe in severe second wave; record daily cases
- Fed September 15–16 most recent meeting: held 0.00–0.25%; outcome-based forward guidance adopted
- BOJ overnight rate at pandemic-era low; Jamaica economic recovery gradual; COVID restrictions in place
- NHT individual ceiling J$6.5 million; rates 0, 2, 4 per cent; housing demand sustained by low finance costs
- Jamaica tourism sector facing another difficult season; Holness government one month into fresh mandate
US Election: Result in the Balance
The United States presidential election took place on 3 November 2020, producing a result that remained in the balance as vote counting continued in several key states. Former Vice President Joseph Biden had accumulated an electoral college lead based on states called by major news organisations, including Wisconsin and Michigan, while critical contests in Pennsylvania, Georgia, Nevada, and Arizona remained uncalled as of the time of this edition’s preparation. The extraordinary volume of mail-in ballots — cast in record numbers due to pandemic concerns — meant that counting was taking longer than in previous election cycles. Financial markets, which had entered election week with elevated volatility, exhibited a cautious calm as the counting proceeded, with equities rising modestly on relief that the election had produced no immediate post-election disruption and that a clear winner appeared probable.
For Jamaica, US electoral transitions are relevant through their economic policy implications rather than any partisan orientation. The key considerations for the Jamaican economy are the trajectory of US growth — which drives remittance flows and tourism demand — and the path of US monetary policy, which shapes global financing conditions. Both major US party platforms in 2020 were oriented toward significant fiscal support for the economy, though the scale and composition differed. The Federal Reserve’s independence from political direction provides continuity for monetary policy regardless of the electoral outcome.
COVID Second Wave: Europe and the United States
October 2020 brought a sharp and alarming surge in COVID-19 cases across the Northern Hemisphere, as the combination of cooler weather, the return of indoor socialising, and pandemic fatigue drove transmission sharply higher. In Europe, countries including France, Germany, the United Kingdom, and Spain were recording daily case counts that dwarfed the spring 2020 first wave, prompting renewed lockdowns and restrictions. The United Kingdom implemented a tiered restriction system in mid-October before moving to a full national lockdown in England from 5 November. France announced a second national lockdown effective 30 October. For these economies, the second wave represented a significant setback to economic recovery and raised new questions about the pace and completeness of the rebound.
In the United States, October 2020 also saw a sharp escalation of COVID case counts, with daily figures rising throughout the month and hospitalisations beginning to climb. The US political environment had complicated the public health response, and several states were recording record case levels by late October. For Jamaica, the European and US second waves created additional headwinds for the winter 2020 to 2021 tourism season, which was already expected to be significantly below pre-pandemic levels. Source market disruption, travel restrictions, and reduced consumer confidence in travel all pressured booking volumes.
Federal Reserve: New Framework, Continued Accommodation
The Federal Open Market Committee’s most recent meeting, held on 15 to 16 September 2020, embedded the new average inflation targeting framework into formal policy guidance. The Committee stated that it expected to maintain rates near zero “until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.” This outcome-based forward guidance — rather than the date-based or data-threshold guidance used in earlier cycles — represented a commitment to remaining accommodative until the economy had genuinely met the Fed’s dual mandate objectives, rather than pre-emptively tightening in response to improvements in the outlook.
The Federal Reserve’s November 4 to 5 meeting is taking place simultaneously with this edition, and the outcome will be covered in the December review. The consensus expectation is that the FOMC will hold rates at 0.00 to 0.25 per cent and maintain its asset purchase programme, acknowledging that the economic recovery is continuing but has moderated and that significant uncertainty remains. For Jamaica’s mortgage market, the global low-rate environment anchored by the Fed’s accommodation continues to provide the backdrop for the BOJ’s own pandemic-era low policy rate and the favourable commercial mortgage conditions available to property buyers.
Jamaica: Fresh Mandate, Continuing Challenges
The Holness administration, which secured a decisive re-election mandate in the September 3 general election, was one month into its new parliamentary term as October 2020 concluded. The new administration faced the challenge of managing the ongoing COVID-19 pandemic, supporting an economy severely damaged by the tourism collapse, and maintaining Jamaica’s IMF programme commitments under extraordinary circumstances. COVID restrictions remained in place, with curfews and gathering limits constraining economic activity in affected sectors. The National Housing Trust continued to operate as a primary vehicle for affordable housing finance, with its J$6.5 million individual loan ceiling and subsidised rates of 0, 2, and 4 per cent supporting demand from the contributor base.
Looking Ahead
The US election result, expected to be called in the coming days as vote counting concludes, will be the dominant near-term external event. The Federal Reserve November meeting outcome will provide the next monetary policy update. For Jamaica, the trajectory of the COVID second wave in source markets will determine the winter tourism season outlook. The government’s budget preparations for 2021 to 2022 will provide the next major fiscal signal. In the mortgage market, low rates and NHT programme availability continue to support housing demand.
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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