Publication date: 5 January 2021 | Covering: December 2020
Monthly Briefing
- Pfizer-BioNTech and Moderna vaccines authorised; US rollout begun December 14 and 21; historic milestone
- US$900 billion COVID relief bill signed December 27; US$600 direct payments; extended unemployment insurance
- Fed December 15–16 holds 0.00–0.25%; new forward guidance tied to “substantial further progress” on employment
- BOJ overnight rate at pandemic-era low; Jamaica COVID restrictions continuing; economy under strain
- NHT individual ceiling J$6.5 million; rates 0, 2, 4 per cent; housing demand resilient despite pandemic pressures
- Jamaica winter tourism season disrupted; government extending CARE household income support
Vaccines: The Beginning of the End of the Pandemic
December 2020 produced what may prove to be the single most consequential public health milestone of the decade: the first authorisations and deployments of COVID-19 vaccines. The United States Food and Drug Administration granted Emergency Use Authorization for the Pfizer-BioNTech vaccine on 11 December 2020, and vaccinations began on 14 December with frontline healthcare workers receiving the first doses. The Moderna vaccine received EUA on 18 December, with deployment beginning days later. The two mRNA vaccines — which had demonstrated efficacy rates above 90 per cent in Phase 3 trials — represented the culmination of an unprecedented global scientific effort compressed into under a year. The United Kingdom had preceded the US, beginning its Pfizer vaccination programme on 8 December.
For Jamaica and the broader Caribbean, the December vaccine authorisations represented the beginning of a pathway out of the pandemic, though the timeline for access to vaccine doses in developing economies remained uncertain. The COVAX facility — the WHO-led initiative to ensure equitable global vaccine distribution — was expected to provide Jamaica with doses in early 2021, though the precise schedule depended on production capacity and allocation decisions still being worked through. The vaccine news was nevertheless transformative for market sentiment and economic expectations globally: the prospect of returning to something approaching normal economic activity within 12 months was now plausible in a way it had not been previously.
US Fiscal Relief: US$900 Billion Before Year-End
After months of congressional gridlock, the United States enacted a US$900 billion COVID-19 relief package on 27 December 2020, when President Trump signed the Consolidated Appropriations Act. The legislation extended federal unemployment benefits, provided US$600 direct payments to most American adults, extended the Paycheck Protection Programme for small businesses, provided additional rental assistance, and funded vaccine distribution. The package represented a significant but not transformative fiscal injection compared with the CARES Act of March 2020, and the incoming Biden administration had signalled its intention to seek additional relief of approximately US$1.9 trillion in early 2021. For Jamaica, the US fiscal support sustains the income and employment conditions that underpin remittance flows, a critical source of household income and foreign exchange for the island.
Federal Reserve December Meeting: Forward Guidance Strengthened
The Federal Open Market Committee held the federal funds rate at 0.00 to 0.25 per cent at its December 15 to 16, 2020 meeting and made a notable enhancement to its asset purchase forward guidance. The Committee indicated it expected to maintain the current pace of purchases — US$80 billion per month in Treasury securities and US$40 billion per month in agency mortgage-backed securities — “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.” This was a strengthening of the guidance, providing greater certainty about the duration of asset purchases. The post-meeting dot plot showed a consensus for near-zero rates through 2023.
For Jamaica, the December Fed meeting capped a year in which US monetary policy had moved to an unprecedented degree of accommodation: two emergency rate cuts in March to bring the fed funds rate to the zero lower bound, unlimited QE committed in March (later refined to specific monthly amounts), and a succession of emergency lending facilities. The global financial environment created by this extraordinary accommodation — ample liquidity, compressed spreads, low long-term yields — has been broadly supportive of Jamaica’s financing conditions, including its ability to access international capital markets and maintain competitive commercial mortgage rates domestically.
Jamaica’s Property Market: End-of-Year Assessment
Jamaica’s property market through the December period reflected a year of contrasts. The economy contracted sharply in 2020 due to the devastation of the tourism sector and COVID-related disruptions, yet the residential property market demonstrated notable resilience. Demand for homeownership remained solid, supported by low BOJ policy rates, active NHT lending at J$6.5 million individual limits and 0, 2, and 4 per cent rates, and the structural desire of Jamaican households to own their homes. Diaspora and remittance-backed property purchases — a consistent feature of the market in recent years — continued to provide demand support even as domestic economic activity was constrained. Construction activity, however, was affected by supply chain disruptions and cost inflation in building materials.
Looking Ahead
The Biden inauguration on 20 January 2021 will mark the formal transition of the US administration, with additional fiscal stimulus high on the new administration’s agenda. The Federal Reserve’s January 26 to 27 meeting will provide the first FOMC assessment of the economic outlook in the new year. For Jamaica, the commencement of the COVAX vaccine rollout and the trajectory of the winter tourism season will be the primary near-term economic indicators. The property market enters 2021 with solid underlying demand and a supportive financing environment, if with the constraint of continued COVID-related uncertainty.
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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