Publication date: 5 April 2024 | Covering: March 2024
Monthly Briefing
- BOJ holds overnight rate at 7.00 per cent; February QMPR framework defines near-term policy path
- US Federal Reserve holds at Mar 19–20 meeting; projects three 25bps cuts for 2024 in updated dot plot
- Jamaica CPI approaching the 4–6 per cent target range; March data due from STATIN in mid-April
- Commercial mortgage market stable at 8–12 per cent; affordability awaiting second-half rate relief
- NHT J$7.5 million limit now nine months in; new energy finance product developments in 2024
- Caribbean and Jamaican housing demand underpinned by diaspora and returning-resident purchasing
BOJ Holds at 7.00 Per Cent; Policy Path Clearly Oriented Toward Easing
The Bank of Jamaica’s overnight policy rate remained unchanged at 7.00 per cent per annum through the March quarter, with the February 2024 Monetary Policy Committee meeting and its accompanying Quarterly Monetary Policy Report setting the framework for the first half of 2024. The February QMPR reiterated the BOJ’s expectation that Jamaica’s headline inflation would continue to decelerate, with the 4.0 to 6.0 per cent target range within sight for the second half of 2024. The Bank explicitly noted the improved inflation trajectory while maintaining that it was not yet ready to ease, citing the need for sustained evidence of within-target performance and the continuing tightness of global monetary conditions.
The sustained hold at 7.00 per cent now extends to seventeen months, one of the longest periods without a rate change in the BOJ’s modern operating history. This reflects the Bank’s genuine caution: having been burned by inflation that proved stickier than expected in 2022 and 2023, the Monetary Policy Committee has preferred to err on the side of maintaining restrictive conditions until the data is unambiguous. The cost of this caution has been borne by borrowers — particularly commercial mortgage holders facing rates of 8 to 12 per cent — but the Bank has viewed this as a necessary price for restoring durable price stability.
For the housing market, the consequence of the extended hold is a commercial mortgage affordability environment that remains significantly constrained. Higher-income buyers and those able to access NHT finance have continued to transact, but the mass market of first-time buyers dependent on commercial mortgage credit has faced a sustained squeeze. Each month the rate holds at 7.00 per cent adds further accumulated demand to the pool of buyers who will re-enter the market when rates eventually ease, setting up what could be a significant increase in transaction volumes once the easing cycle begins in earnest.
US Federal Reserve March Decision: Three Cuts Still on the Table
The US Federal Reserve held the federal funds rate at the 5.25 to 5.50 per cent target range at its March 19 to 20 meeting, as universally expected. The substantive news came from the updated Summary of Economic Projections — the “dot plot” — which showed that the median FOMC member still expected three 25-basis-point cuts during 2024. This projection, unchanged from December 2023, provided some reassurance to markets that had grown anxious about the persistence of above-target US inflation in early 2024. Chair Powell reiterated that policy would remain data-dependent and that the Committee was not rushing to cut, but the projection of three 2024 cuts indicated the Fed’s general orientation toward easing within the year.
For Jamaica, the Fed’s March projection is significant. If the US does deliver three rate cuts of 25 basis points each before year-end — beginning, as most expect, in the summer months — the global rate environment will have eased materially by the end of 2024. This would provide the BOJ with a more supportive backdrop for its own easing cycle, narrowing the constraint imposed by the interest rate differential with the United States. Jamaica’s exchange rate management would become easier, and the case for BOJ cuts would be reinforced by the international monetary context rather than complicated by it.
Inflation: The March Data and the Target Range
Jamaica’s inflation data through the first quarter of 2024 has shown a consistent deceleration from the 6 to 7 per cent range seen in late 2023. The February 2024 point-to-point CPI reading was in the upper half of the 6 per cent range, representing a meaningful decline from the 7 to 8 per cent readings of mid-2023 and a dramatic reduction from the 10 to 12 per cent peak readings of 2022. The March 2024 CPI data — due from STATIN in mid-April — will be watched to see whether the deceleration continues and whether there is a reading that touches or approaches the 6.0 per cent upper bound of the target range.
Should March show inflation at or below 6.0 per cent, it would represent the first reading within the BOJ’s formal target range since the commodity shock began to drive prices upward. This would be a milestone for BOJ policy, even if the Bank would characterise it as a beginning rather than a conclusion. One in-range reading does not constitute the “sustained evidence” the BOJ has sought; the Bank would likely want to see several consecutive months within the range before concluding that the inflation mandate has been met. But a first within-range reading would powerfully reinforce the narrative that the easing cycle is approaching.
NHT and Housing Finance: Nine Months of the New Framework
The National Housing Trust’s July 2023 product reforms have now been in effect for nine months. The J$7.5 million individual loan limit, the 5 per cent rate band for higher earners, and the elevated multi-applicant ceilings continue to define the Trust’s mortgage offer. New product developments within the NHT’s 2024 programme — including a facility to finance residential energy improvements at concessionary rates — reflect the Trust’s evolving mandate to support both shelter affordability and energy security among its contributor base. The details of new products will be communicated as they are formally launched.
Demand for NHT mortgage facilities has remained robust through the first quarter of 2024. The combination of the NHT’s below-market rate structure (0 to 5 per cent against commercial alternatives of 8 to 12 per cent), the expanded loan limits of July 2023, and the underlying strength of demand from the contributor base has kept application volumes high relative to historical norms. The principal constraint on NHT lending activity remains the pace of housing solution delivery rather than the availability of mortgage finance: contributors who are approved for NHT loans must have an eligible property to purchase, and the supply of NHT-scheme units and qualifying open market properties does not always align perfectly with the pipeline of approved applicants.
The Commercial Property Market in Q1 2024
The Jamaican residential property market entered 2024 with a degree of momentum inherited from 2023’s relatively active transaction environment. Demand in the Kingston metropolitan area, St. Catherine’s commuter corridor, and tourist-adjacent communities on the north coast has remained steady, even as affordability for commercial mortgage borrowers has been constrained by the elevated rate environment. Cash buyers and NHT-eligible purchasers have continued to transact, sustaining deal flow in the market. New development launches in the first quarter of 2024 have focused on the affordable-to-mid market, with townhouse and apartment projects in Portmore, Spanish Town, and outer Kingston communities accounting for the largest share of new supply.
Property prices in established communities have continued to show resilience. The combination of limited new supply in premium and established locations, the sustained demand from diaspora and returning-resident buyers, and the general preference of Jamaicans to hold property as a store of value has supported prices even in a higher-rate environment. First-time buyer demand has been somewhat suppressed relative to its underlying potential, as the gap between aspirational property prices and achievable NHT or commercial loan amounts has widened with each year of property price appreciation without commensurate loan limit increases.
Looking Ahead
The next BOJ Monetary Policy Committee meeting — expected in May or June — will be preceded by the March and April CPI data releases. If both confirm the deceleration trend and position headline inflation at or near the 6.0 per cent upper bound of the target range, the case for the first rate cut at the May or June meeting will be substantially strengthened. The BOJ’s own February QMPR projections pointed toward second-half 2024 action, but a faster-than-expected deceleration of inflation could bring the calendar forward.
In the US, the Federal Reserve’s May 1 meeting will provide the next major input to global monetary sentiment. If US economic data over April supports the view that the disinflation process is proceeding, the June meeting becomes the focal point for the first US cut. For Jamaica’s housing market, the second half of 2024 is shaping up as the beginning of a new, more supportive rate environment — a development that will expand the pool of creditworthy borrowers who can access commercial mortgage finance at workable cost and support the transactions that the structural housing deficit makes necessary.
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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