Publication date: 5 June 2024 | Covering: May 2024
Monthly Briefing
- BOJ holds overnight rate at 7.00 per cent at May Monetary Policy Committee meeting
- US Federal Reserve holds at 5.25–5.50 per cent at May 1 meeting; September cut expectations mount
- Jamaica CPI 5.3 per cent point-to-point in April; trend toward target range continues
- Commercial mortgage rates stable at 8–12 per cent; affordability pressures persist
- NHT J$7.5 million limit and SMART Energy loan providing expanding access to affordable finance
- Property market activity steady; Kingston metropolitan demand and diaspora purchasing sustained
BOJ Maintains 7.00 Per Cent as Inflation Approaches Target
The Bank of Jamaica held its overnight policy rate at 7.00 per cent per annum following the May 2024 Monetary Policy Committee meeting. The hold continues a stance that has been maintained since November 2022 — now eighteen months without adjustment — as the Bank monitors the evolution of headline inflation toward the 4.0 to 6.0 per cent target range. The BOJ’s post-meeting communication acknowledged the continued downward trajectory of inflation while maintaining that it wished to see further confirmation of on-target performance before beginning to ease. Market participants and financial institutions have largely absorbed the expectation of a first rate cut in the second half of 2024, with the August Monetary Policy Committee meeting viewed as the most probable vehicle.
The prolonged hold at 7.00 per cent has served its intended purpose. Jamaica’s inflation — which peaked at double-digit levels in the aftermath of the 2021 to 2022 global commodity and supply chain shock — has decelerated consistently. The annual CPI rate for April 2024 of 5.3 per cent sits just above the 6.0 per cent upper bound of the BOJ’s target, representing a dramatic improvement from the 11 to 12 per cent readings seen at the height of the shock. The BOJ has signalled that it is seeking evidence that this trajectory is durable and not merely cyclical, which is why it continues to hold even as the case for easing strengthens.
For Jamaica’s housing market, the sustained hold at 7.00 per cent has meant that the commercial mortgage cost environment has remained elevated through the first half of 2024. Variable rate mortgage holders have seen no relief, and new borrowers have continued to face rates of 8 to 12 per cent. However, the expectation of cuts later in 2024 is itself a market mover: lenders are beginning to assess how rapidly they can reprice as the BOJ moves, and some borrowers are choosing to proceed now rather than waiting, on the basis that property prices may continue to rise regardless of what happens to interest rates.
US Federal Reserve: May Hold and the Road to September
The US Federal Reserve held the federal funds rate unchanged at the 5.25 to 5.50 per cent target range at its May 1, 2024 meeting. Chair Jerome Powell struck a notably cautious tone at the post-meeting press conference, noting that recent inflation data had not given the Committee confidence that the disinflation process was advancing as quickly as hoped. US CPI for the first quarter of 2024 had come in above expectations, and Powell indicated that the Committee would need to see several months of better data before it would be ready to cut. The statement effectively ruled out a June cut and cast doubt on whether July would bring action, with September emerging as the most credible target for the first US rate reduction since 2020.
For Jamaica, the Fed’s extended hold is a double-edged consideration. On one hand, it sustains the US dollar’s relative attractiveness, which maintains pressure on the Jamaican dollar exchange rate and complicates the BOJ’s own easing calculus. On the other, the US economy’s underlying strength during this period has supported diaspora employment and remittance flows, providing Jamaica with a steady and substantial source of foreign exchange. The roughly US$3.3 to 3.4 billion in annual remittances that Jamaica has been receiving represents a structural pillar of external stability that has allowed the BOJ to manage the exchange rate and maintain reserves even as the global rate environment has been challenging.
Inflation Trajectory: April’s 5.3 Per Cent and the Coming Months
The April 2024 point-to-point CPI reading of 5.3 per cent follows the March and February readings that showed inflation decelerating from the 6 to 7 per cent range. The pattern through early 2024 reflects the combined effect of the global easing of commodity price pressures, the lagged impact of the BOJ’s sustained tight stance, and the drop-out of high-base comparison months from the 2022 and 2023 inflation spike from the annual calculation. The May 2024 CPI data, to be published by STATIN in mid-June, will be the next data point; the April trajectory suggests a reading in the 5.0 to 5.5 per cent range is probable.
If the May reading comes in below 5.0 per cent, it would mark the first sub-5 reading since the tightening cycle began and would substantially strengthen the case for a BOJ cut at the August meeting. If it holds in the 5.0 to 5.5 per cent range, the direction is still clear but the pace of convergence toward the 4.0 to 6.0 per cent target remains gradual. In either scenario, the BOJ is approaching the conditions it has set for the commencement of easing.
NHT: Expanding Access Through the July 2023 Framework
The National Housing Trust continues to operate the product parameters established in July 2023: a J$7.5 million individual loan limit (J$8.5 million for qualifying lower-value properties), rate bands of 0 to 5 per cent based on income, and multi-applicant ceilings of J$15 million and J$21 million. In addition, the Trust introduced the SMART Energy loan in 2024 — a J$1.5 million facility specifically for residential solar and energy-efficiency installations. Together, these products represent the NHT’s most comprehensive suite of accessible finance tools in recent years.
The NHT’s pipeline of housing solutions — exceeding 41,000 units at various stages of planning and development — remains the largest single source of new affordable residential supply in Jamaica. However, the pace at which these solutions are completed and delivered to contributors remains a challenge. Construction cost inflation, land availability, and the complexity of utility and road infrastructure in new developments are all factors that extend timelines. The NHT’s ability to deliver more housing more quickly remains constrained not by financing but by the real-sector capacity of Jamaica’s construction industry and development system.
The Commercial Property Market
Jamaica’s residential property market has maintained its structural characteristics through May 2024. The Kingston metropolitan area — encompassing New Kingston, Half Way Tree, Portmore, and the upscale communities of Cherry Gardens, Barbican, and Jack’s Hill — continues to see active demand for both rental and purchase transactions. Supply remains tight in established communities, supporting price stability or modest appreciation. In outlying communities and newly developed areas, particularly along the Highway 2000 corridor in St. Catherine, new residential projects continue to attract first-time buyers and investor purchasers.
Diaspora interest remains a meaningful component of demand, particularly for upper-mid and premium properties in resort-adjacent communities along the north coast and in the hills of Kingston. Returning residents and overseas buyers typically access property on a cash or near-cash basis, or through diaspora mortgage products offered by some Jamaican financial institutions, and are therefore less sensitive to the domestic mortgage rate environment than local first-time buyers. Their continued participation supports price levels in the segments where they are most active.
Looking Ahead
The BOJ’s June Monetary Policy Committee meeting will be watched for any further forward guidance on the timing and pace of rate reductions. If the Committee strengthens its easing signal — or takes any preparatory action such as adjusting reserve requirements — the market will interpret this as confirmation that an August cut is imminent. The May CPI data, due in mid-June, will be the most important domestic input to that meeting.
In the US, the Federal Reserve’s June 11 to 12 meeting will provide updated economic projections and a new dot plot, both of which will clarify the timing and extent of expected US easing. For Jamaica’s housing market, the trajectory of the next six months is shaping up to be one of gradual improvement in financing conditions — a welcome shift after the extended elevated-rate period of 2022 to 2024 — though the structural supply challenge remains the most significant constraint on market functioning.
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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