Publication date: 5 March 2021 | Covering: February 2021
Monthly Briefing
- Fed January 26–27 holds 0.00–0.25%; economy “still far from” employment goal; full accommodation maintained
- Biden’s US$1.9 trillion stimulus clears Senate February 27; House passage and presidential signature imminent
- US COVID winter wave declining; vaccine rollout accelerating; economic reopening hopes building
- BOJ overnight rate at pandemic-era low; Jamaica economic recovery gradual; remittances resilient
- NHT individual ceiling J$6.5 million; rates 0, 2, 4 per cent; housing finance demand solid
- Jamaica vaccine programme expanding through COVAX; winter tourism season drawing to close
Federal Reserve January Meeting: Unwavering Accommodation
The Federal Open Market Committee held the federal funds rate at 0.00 to 0.25 per cent at its January 26 to 27, 2021 meeting and made no changes to the asset purchase programme of US$120 billion per month. The post-meeting statement described the US economic recovery as having “moderated in recent months,” a reference to the winter COVID wave’s dampening effect on activity in December and January, and emphasised that the labour market remained “well below” levels consistent with the Committee’s maximum employment mandate. Chair Powell reiterated that it was not yet time to talk about tapering, and that the FOMC expected to maintain asset purchases until “substantial further progress” had been made on both the inflation and employment fronts.
The January meeting took place against the backdrop of the early weeks of the Biden administration and active congressional debate over the scale of additional fiscal stimulus. Powell expressed support for fiscal stimulus in principle, noting that the economic costs of under-delivering on support were likely to outweigh the risks of over-delivering. For Jamaica’s mortgage market, the FOMC’s unwavering commitment to near-zero rates and large-scale asset purchases continues to support the global liquidity backdrop that keeps international financing conditions accommodative. The absence of any near-term Fed normalisation provides a window in which Jamaica’s commercial mortgage market can continue offering competitive rates.
US Stimulus: US$1.9 Trillion Nears Passage
President Biden’s proposed American Rescue Plan — a US$1.9 trillion stimulus package — cleared the US Senate on 27 February 2021, passing by the narrowest possible margin of 50 to 49 under the budget reconciliation process. The Senate package requires House confirmation of the final version before presidential signature, a step expected in early March. The legislation represents a decisive commitment to demand-side stimulus at scale, providing US$1,400 direct payments, extended unemployment benefits, vaccine funding, and state and local government support. The package’s passage through the Senate removes the principal legislative uncertainty, and the final bill is expected to be signed into law within days.
For Jamaica, the implications of large-scale US fiscal stimulus run through multiple channels. Remittance flows — a critical source of household income and foreign exchange for Jamaica — are supported by the financial health of the US Jamaican diaspora, which in turn is sensitive to US employment and income conditions. Diaspora purchasing of Jamaican residential property has historically been correlated with the economic fortunes of the diaspora community. Additionally, the tourism recovery — critical to Jamaica’s external balance and broader economic momentum — depends heavily on the trajectory of the US recovery, which will be supported by the stimulus package.
COVID Trends and the Recovery Outlook
The COVID-19 situation globally in February 2021 showed encouraging signs of improvement in key markets. In the United States, the severe winter wave that had peaked in January — producing daily case counts approaching 300,000 at its height — was declining through February, supported by accelerating vaccination and the natural waning of the seasonal surge. The vaccination programme, which had launched in mid-December 2020 with the Pfizer-BioNTech and Moderna vaccines, was building pace, with daily vaccination rates rising toward one million per day. The US CDC was beginning to update guidance on activities for vaccinated individuals, tentatively sketching out the pathway toward reopening.
For Jamaica, February 2021 represented a cautious moment of transition. The island had received its first COVAX vaccine doses and was beginning to roll out vaccination for priority groups. The winter tourism season — a critical revenue period — was drawing to a close, with visitor arrivals still well below 2019 levels but showing marginal improvement as travel confidence gradually returned in vaccinated source markets. The government’s priority was to build vaccination coverage sufficiently to protect public health and provide the confidence necessary for the full tourism reopening the economy required.
Jamaica Mortgage Market: Stable Low-Rate Environment
The Bank of Jamaica’s overnight policy rate remained at its pandemic-era accommodative level through February 2021. The BOJ’s stance reflects both the priority of supporting economic recovery and the assessment that current inflation pressures — driven primarily by food and energy prices with a strong global supply-side component — do not at this stage warrant a tightening response. Commercial banks and building societies continue to operate in a liquid environment, supporting competitive mortgage offerings for qualified borrowers. The National Housing Trust’s J$6.5 million individual loan limit and rates of 0, 2, and 4 per cent remain the foundation of affordable residential finance, with solid NHT disbursement volumes reflecting persistent homeownership demand.
Looking Ahead
The passage and signing of the American Rescue Plan, expected within the next week, will be the dominant US economic event of early March. The Federal Reserve’s March 16 to 17 meeting will be closely watched for any adjustment to the taper timeline or forward guidance in light of the massive fiscal package and improving vaccination trajectory. For Jamaica, the budget season and NHT annual plan will provide signals about housing policy priorities. The trajectory of the island’s vaccination programme through March and April will be determinative for the summer 2021 tourism recovery outlook.
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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