Publication date: 5 April 2021 | Covering: March 2021
Monthly Briefing
- Biden signs US$1.9 trillion American Rescue Plan March 11; US$1,400 direct payments; massive economic boost
- Fed March 16–17 holds 0.00–0.25%; unanimous no-hike consensus through 2023; US$120bn monthly purchases continue
- US vaccine rollout accelerating; Johnson & Johnson single-dose authorised; economic reopening accelerating
- BOJ overnight rate at pandemic-era low; Jamaica budget season; fiscal discipline under IMF programme
- NHT individual ceiling J$6.5 million; rates 0, 2, 4 per cent; housing finance demand solid
- Jamaica tourism sector hoping for summer 2021 recovery; vaccination programme critical enabler
The American Rescue Plan: Landmark US Fiscal Stimulus
President Biden signed the American Rescue Plan Act on 11 March 2021, enacting the largest single-piece US fiscal stimulus legislation since the Second World War. The US$1.9 trillion package — passed along party lines, with the Senate approving the measure 50 to 49 on 6 March and the House confirming the Senate version on 10 March — encompasses US$1,400 direct payments to eligible individuals, extension of enhanced federal unemployment benefits, substantial funding for vaccination programmes and public health infrastructure, aid to state and local governments, direct support for schools, and expanded child tax credits. The legislation represents a decisive shift toward demand-side stimulus even as the vaccine-driven recovery was already building momentum in the US economy.
The scale of the American Rescue Plan has generated significant debate among economists about the risk of overheating. Former Treasury Secretary Lawrence Summers publicly argued that the package was several times larger than the estimated output gap, raising the risk of sustained above-target inflation. The Biden administration and Federal Reserve maintained that the priority was ensuring a complete recovery, with the Fed’s average inflation targeting framework explicitly designed to tolerate a period of above-2-per-cent inflation as part of the symmetric approach to the inflation mandate. For Jamaica, the US stimulus provides both a near-term external demand boost — supporting remittances and tourism demand — and a medium-term consideration as the risk of US inflation could eventually necessitate monetary tightening that feeds into global financial conditions.
Federal Reserve March Meeting: Zero Rates Through 2023
The Federal Open Market Committee held the federal funds rate at 0.00 to 0.25 per cent at its March 16 to 17, 2021 meeting, maintaining the US$120 billion per month asset purchase programme. The post-meeting Summary of Economic Projections showed a remarkable degree of unanimity: all eighteen participants projected the federal funds rate would remain at 0.00 to 0.25 per cent through the end of 2021, and fifteen of eighteen projected no rate change through end-2022. The median projected rate for end-2023 remained at 0.00 to 0.25 per cent. This unusually strong consensus on an extended period of near-zero rates reflected the FOMC’s commitment to the new average inflation targeting framework and its assessment that the substantial employment recovery still required significant time and continued policy support.
Chair Powell’s press conference reiterated the FOMC’s data-dependent approach while being clear that the conditions for tapering the asset purchase programme remained a long way from being met. The March meeting occurred just after the passage of the American Rescue Plan, providing additional fiscal support context for the Committee’s optimistic growth projections while reinforcing the case for maintaining accommodation to ensure the fiscal stimulus translated into durable employment gains. For Jamaica’s mortgage market, the March FOMC output — the clearest signal yet of extended US near-zero rates — provided important confirmation that the global financing environment would remain supportive for an extended period.
Jamaica: Budget Season and Mortgage Market
Jamaica’s March 2021 period coincided with budget preparation season, with the government developing its fiscal framework for 2021 to 2022 under the discipline of its IMF Precautionary and Liquidity Line arrangement. The COVID-19 fiscal shock had materially widened Jamaica’s deficit in 2020 to 2021, as pandemic emergency spending collided with a collapse in tourism revenue and reduced tax receipts. The government’s commitment to maintaining fiscal discipline — even through the pandemic — was a central feature of its economic management, with IMF programme compliance providing both an external anchor and access to precautionary financing if needed.
In the mortgage market, the Bank of Jamaica’s pandemic-era low overnight rate continued to support favourable conditions for property buyers. Commercial banks, building societies, and the National Housing Trust were all active in the market, with the NHT’s J$6.5 million individual loan limit and subsidised 0, 2, and 4 per cent rates providing the bedrock of affordable housing finance. The property market had demonstrated notable resilience through the COVID period, with residential demand sustained even as overall economic activity contracted. Diaspora activity and remittance-backed property purchases had been a notable feature of this resilience.
Vaccine Progress and the Tourism Recovery Calculus
The pace of COVID-19 vaccine deployment through March 2021 was defining the global economic recovery trajectory. The United States was accelerating its vaccination programme dramatically, with the Johnson & Johnson single-dose vaccine receiving Emergency Use Authorization in late February adding a third vaccine option alongside Pfizer-BioNTech and Moderna. Daily vaccination rates in the US were approaching and then exceeding two million per day, putting the country on track for broad adult coverage by mid-year. The United Kingdom’s vaccination programme was also well advanced. For Jamaica, vaccine access was advancing through the COVAX facility and bilateral channels, though at a pace that reflected the global supply constraints affecting small developing economies. The government’s priority remained getting healthcare workers and vulnerable groups vaccinated as a foundation for eventual broader coverage.
Looking Ahead
The Federal Reserve’s April 27 to 28 meeting will be the next policy checkpoint, with attention focused on how the FOMC assesses the economic implications of the US$1.9 trillion stimulus package and the accelerating vaccination-driven recovery. For Jamaica, the budget to be presented in April will set the fiscal framework for 2021 to 2022, with housing and NHT policy among the elements of interest. The trajectory of US and UK vaccination programmes will be the principal determinant of whether summer 2021 tourism recovery for Jamaica meets the sector’s cautiously optimistic expectations.
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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