Publication date: 5 October 2021 | Covering: September 2021
Monthly Briefing
- US Federal Reserve September 22 signals taper “imminent”; formal announcement likely November; rates held
- US Delta variant wave peaking in early September; receding by late month; vaccination progress key
- BOJ overnight rate at pandemic-era low; Jamaica CPI rising; supply-side pressures dominant
- NHT individual limit J$6.5 million; rates 0, 2, 4 per cent; critical affordable finance in rising-cost market
- Jamaica tourism disrupted by Delta variant in key source markets; autumn bookings impacted
- Construction costs rising globally; Jamaica housing supply pressures intensifying
Federal Reserve September Meeting: Taper Telegraphed
The US Federal Reserve’s Federal Open Market Committee held the federal funds rate at 0.00 to 0.25 per cent at its September 21 to 22 meeting but delivered the clearest signal yet that the asset purchase taper would begin “imminently.” Chair Powell’s press conference indicated that the FOMC judged the “substantial further progress” threshold for beginning the taper to have been met or nearly met on the inflation side, and closely approached on the employment side. The Committee’s updated Summary of Economic Projections showed a median participant expecting the first rate hike in 2022 — a shift from the June projection that showed 2023 as the median. Markets interpreted the September communications as a clear path to a November taper announcement and 2022 rate hikes, with the pace of those hikes dependent on how inflation and employment data evolved.
For Jamaica, the September Fed meeting confirms the trajectory: the extraordinarily accommodative US monetary environment is ending. The taper announcement, expected in November, will begin reducing the supply of US dollars being injected into the financial system, progressively tightening global liquidity conditions. Jamaica’s commercial mortgage market, which has benefited from this global low-rate environment, is approaching the end of a period of unusually favourable financing conditions for property buyers with commercial mortgage needs.
Delta Wave and Jamaica’s Tourism Disruption
The Delta variant of SARS-CoV-2, which drove the fourth major wave of COVID-19 infections in the United States beginning in July 2021, reached its US peak in early September before beginning a gradual decline. The wave was characterised by extremely high transmissibility — Delta’s reproduction number substantially higher than prior variants — and disproportionate severity among the unvaccinated, placing renewed pressure on hospital systems in regions with lower vaccination rates. For Jamaica’s tourism sector, the Delta surge in key North American source markets disrupted autumn travel demand at a critical moment: the island had been seeing encouraging recovery through the summer and was hoping to build momentum into the 2021 to 2022 winter high season.
Jamaica itself experienced significant Delta-driven community transmission in August and September 2021, with the government introducing targeted restrictions and curfews to manage case load. The island’s vaccination programme was advancing, but coverage rates in the broad population remained below the levels that would provide robust community-level protection. The combination of domestic transmission and source-market disruption created a challenging environment for the tourism sector’s recovery through the September period, though the early signs of the Delta wave’s recession by late September offered cautious optimism for the approaching winter season.
BOJ and Jamaica’s Mortgage Market
The Bank of Jamaica’s overnight policy rate remains at pandemic-era accommodative levels, providing the foundation for commercial mortgage rates that are still near their most favourable in years. Jamaica’s CPI inflation has been drifting above the BOJ’s 4.0 to 6.0 per cent target range, driven by supply-side factors — rising global commodity prices, shipping cost inflation, and supply chain disruptions — that are difficult to address through monetary tightening alone. The BOJ has been monitoring inflation developments and communicating that it will act if demand-side pressures become a significant inflation driver, but the primary inflationary forces at this stage remain on the supply side.
For the property market, the current commercial mortgage environment — while not as low as the extreme lows of mid-2020 — remains highly favourable by historical standards. Jamaica’s NHT subsidised rates of 0, 2, and 4 per cent continue to provide the most accessible finance for eligible contributors, and the J$6.5 million individual ceiling covers a substantial portion of the entry-level residential market. Rising construction costs — reflecting global increases in steel, cement, timber, and fixture prices — have been pushing property prices upward, partially offsetting the affordability benefits of low mortgage rates.
Looking Ahead
The US Federal Reserve’s November 2 to 3 meeting is the next major event, at which the formal taper announcement is widely expected. The pace of the taper and any signals about the 2022 rate hike timeline will be the key outputs. For Jamaica, the winter tourism season — December 2021 through April 2022 — is the critical period for the sector’s recovery trajectory. A successful winter season, assuming the Delta wave does not resurge, would provide important external account support and labour market income that feeds through to the property market.
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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