Publication date: 5 December 2015 | Covering: November 2015
Monthly Briefing
- Paris terrorist attacks November 13: 130 dead; coordinated ISIS assault on city; France declares state of emergency
- Fed October 27–28 holds but explicitly mentions “at its next meeting” for potential hike; December signal clear
- US October payrolls 271,000 — strongest of year; unemployment 5.0%; wage growth rises; December hike near-certain
- China’s yuan added to IMF SDR basket November 30: recognition of globalisation of Chinese currency
- COP21 Paris climate conference begins November 30; Jamaica among most vocal for 1.5 degree limit
- BOJ easing; Jamaica IMF EFF; NHT J$6.5 million ceiling; rates 0, 2, 4 per cent
Paris Attacks: Terror Strikes the French Capital
The coordinated terrorist attacks in Paris on 13 November were the deadliest atrocity in France since the Second World War. Seven attackers killed 130 people and wounded hundreds more in near-simultaneous assaults on the Bataclan concert hall, the Stade de France, and several cafes and restaurants in the tenth and eleventh arrondissements. The attacks were claimed by the Islamic State and triggered an immediate declaration of a state of emergency by President Hollande, who described the attacks as “an act of war”. France launched retaliatory airstrikes on the ISIS stronghold of Raqqa in Syria within days. The Paris attacks sent a shock through European societies and governments, reigniting debates about security, immigration, and the management of the Syrian refugee crisis. Financial markets were rattled briefly but recovered quickly: global equities fell sharply on the Monday following the attacks before partially recovering, as markets concluded that while the human and political consequences were profound, the attacks were unlikely to alter the trajectory of the global economy. For the tourism sector globally, including Jamaica’s, each major attack event was a reminder of the demand vulnerability of the hospitality industry to security incidents elsewhere, even when the destination itself was unaffected.
Fed October Statement: December Signal Is Clear
The Federal Reserve’s October 27 to 28 meeting produced no rate change, but the accompanying statement contained language that markets read as the strongest December hike signal yet. For the first time in the post-crisis period, the statement explicitly stated that the Committee “will assess whether it will be appropriate to raise the target range at its next meeting”. The phrasing was a departure from the FOMC’s usual practice of avoiding explicit reference to specific upcoming meetings in its policy statements, and was widely interpreted as a commitment, absent a significant deterioration in conditions, to raising rates at the December 15 to 16 meeting. Chair Yellen confirmed in subsequent remarks that December remained a live meeting. The context had improved meaningfully since the September surprise hold: the September decision had been driven by “global developments”, primarily China’s market turmoil and the related EM volatility, and those conditions had stabilised through October. The October payrolls data, released on 6 November, were the strongest of the year at 271,000 and pushed December market pricing to above 70 per cent within days of their release.
China’s Yuan Joins the SDR; COP21 Begins
The International Monetary Fund’s Executive Board voted on 30 November to include the Chinese renminbi in the Special Drawing Rights basket from October 2016, recognising the yuan’s growing international use and China’s integration into the global financial system. The SDR is a reserve asset issued by the IMF; its five components — now the dollar, euro, yuan, yen, and sterling — reflect the currencies of the world’s major trading economies. China’s entry into the SDR basket was a milestone in the yuan’s internationalisation, though the currency’s full convertibility and integration into global reserves remained a long-term project. On the same day, the COP21 United Nations climate conference opened in Paris, attended by more than 150 world leaders. Jamaica’s delegation was among the most vocal advocates for a 1.5 degree Celsius temperature limit, aligned with the Alliance of Small Island States which regards the more ambitious target as essential for survival. Negotiations were expected to conclude in mid-December.
Jamaica Mortgage Market in November
Jamaica’s mortgage market continued its gradual recovery through November 2015, with the Bank of Jamaica’s easing cycle providing a progressively more supportive domestic lending environment. The prospect of a December Fed hike had been building for several months, and the mortgage market had adjusted to the expectation of gradually rising external financing costs without significant disruption. The NHT’s J$6.5 million individual ceiling and tiered rates of 0, 2, and 4 per cent continued to anchor affordable housing finance. The Christmas season approach typically stimulates remittances from the Jamaican diaspora in the US, UK, and Canada, providing a seasonal boost to household incomes in urban areas that supports end-of-year property market activity.
Looking Ahead
The Federal Reserve’s December 15 to 16 meeting is now the most anticipated central bank event in years. The market probability of a 25 basis point hike exceeds 75 per cent, and the meeting is regarded in some quarters as the conclusion of the longest pre-hike buildup in modern central banking history. The outcome of COP21 — expected by 11 December — will determine whether the international community has reached a durable climate framework with the 1.5 degree ambition that Jamaica and other small island states have championed. For Jamaica, the fiscal year third-quarter results and the IMF programme review cycle are the primary domestic policy focal points as the year ends. The mortgage market is expected to see seasonal NHT closings pick up in December, providing the final volume of the year before the January quiet period.
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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