• Britain's economy, which had seemed certain to fall into recession in early 2023, has shown some unexpected signs of recovery, raising questions about whether the Bank of England really is about to pause its run of interest rate increases.
• The British central bank signalled on Feb. 2 it was getting close to slowing or pausing its run of interest rate increases after some measures of inflation pressure eased and the economy looked set to go into recession.
• Since then, however, the improvement in the economic data has prompted investors to increase their bets on the Bank Rate, which currently stands at 4.0%, rising to 4.25% next month and 4.5% in May, with a one in three chance of hitting 5% in August.
• Bounces in measures of business activity and consumer confidence and a pickup in tax revenues have led some analysts to upgrade their forecasts for the economy this year, although any growth is likely to be weak. JP Morgan last week raised its projection for gross domestic output growth in 2023 to 0.4% from a previous estimate of 0.1%. That compares with the Bank of England's (BoE) forecast, made in early February, for a contraction of 0.5%.
• Despite the improvement signs, Britain is the only Group of Seven (G7) economy still smaller than before the coronavirus pandemic. Economists say that reflects the pandemic's big impact on the country and the problems relating to Brexit.

(Source: Reuters)

• The European Union agreed Saturday to impose new sanctions on Russia over its invasion of Ukraine targeting more officials and organizations accused of supporting the war, spreading propaganda, or supplying drones, as well as restricting trade on products that could be used by the armed forces.
• Asset freezes were slapped on three more Russian banks and seven Iranian “entities” — companies, agencies, political parties, or other organizations — that manufacture military drones, which the EU suspects have been used by Russia during the war.
• Russia’s energy sector was hit, too — notably oil and coal — and the bloc, through its own measures and political decisions combined with retaliation from Moscow, was rapidly weaned off its dependence on Russian natural gas.
• Ukrainian President Volodymyr Zelenskyy welcomed the new package in his nightly address on Saturday. “Sanctions will continue to be introduced so that nothing remains of the potential of Russian aggression,” he said.
• The sanctions are meant to undermine Russia’s economy and drain funds for its war effort, but they are also increasingly inflicting pain on European economies already hit by high inflation and energy prices and still suffering from the effects of the COVID-19 pandemic.

(Source: AP News)

• Developing human resource capacity through education and training, is one way in which Jamaica is building resilience in tourism, says Minister without Portfolio in the Office of the Prime Minister, Hon. Floyd Green.
• The Minister, who was participating in a panel discussion as part of the inaugural Global Tourism Resilience Conference, cited the work being done by the HEART NSTA Trust, in equipping persons in various skills areas to serve the sector. He said that the Ministry of Tourism recognised “very early” the importance of building human resource skills in the sector and has been providing training and certification at various levels including in the communities.
• “We started the Jamaica Centre of Tourism Innovation (JCTI) to focus a lot on the workforce that we already have and ensuring that they have the certification because a lot of them already have the experience,” he noted.
• The JCTI programme is also being implemented in various high schools across the island. Minister Green noted that while community tourism evolves organically, those involved in this aspect of the sector still require training and certification to build capacity.
• Although the tourism industry has been recovering strongly from the COVID-19 pandemic, it has been faced with a shortage of trained workers.  As such the tourism ministry is seeking to resolve the talent issue with the creation of various training programmes to fill current and anticipated training gaps in the industry.

(Source: JIS)

• SCI has advised that a decision was made on February 10, 2023, by the Board of Directors to pursue the de-listing of its cross-listed ordinary JMD and USD shares on the Jamaica Stock Exchange (JSE).
• The Shares of SCI were listed on the Main Jamaican Dollar Market (JMD Market) and the US Dollar Market (USD Market) of the JSE on June 18, 2018. At the time of listing the Shares were also cross-listed on both markets, and as such, the JMD Shares could be traded on the USD Market and the USD shares could be traded on the JMD Market.
• Trading across markets is extremely low in volume when compared to trading on the Main Market for the JMD and USD Ordinary Shares of SCI, as a result, the decision was taken to delist the cross-listed shares.

(Source: JSE)

• Mexico's inflation is forecast to have eased in the first half of February, a Reuters poll showed on Monday, though consumer prices remain well above the central bank's target of 3%, and are likely to make way for another interest rate hike.
• The median forecast of 13 analysts forecast annual headline inflation of 7.80% in the first half of February, below the 7.88% recorded in the second half of January.
• Annual core inflation, which strips out volatile food and energy products, is expected to have dipped to 8.42%, down from 8.46% in the previous fortnight, and sinking from its peak of 8.66% in the first half of November last year. 
• Banxico, as the Mexican central bank is known, has raised its key interest rate by 700 basis points since its rate-hiking cycle started in June 2021. Earlier this month it raised the rate by a larger-than-expected 50 basis points to 11%, as inflation remains far above its target of 3%, plus or minus 1 percentage point
• It is important to note that smaller future hikes are expected. Banxico’s deputy bank governor, Jonathan Heath, told Reuters last week that the bank's monetary tightening cycle is nearing its end and nominal interest rates could top out at between 11.25% and 11.75%, at which point rates would be kept steady to allow them to take effect.

(Source: Reuters)

• Pointing to potential risks of the Sand Dollar, the International Monetary Fund (IMF) said in a new working paper that the central bank digital currency (CBDC) could pose risks to financial intermediation, integrity, and cybersecurity despite its limited use to date.
• The working paper, entitled “Crypto Assets and CBDCs in Latin America and the Caribbean: Opportunities and Risks”, notes that while the Central Bank of The Bahamas’ (CBOB) architecture has some features to mitigate risks, there are still challenges.
• “The CBDC could substitute for deposits in commercial banks, with implications for bank funding, profitability, and financial intermediation. Moreover, a digital currency involves costly investments in new technologies, infrastructure, and external expertise. It can also expose a central bank to new risks and introduce new challenges for ensuring financial integrity, while cyberattacks or technological glitches can impact the central bank’s reputation,” the paper states.
• However, depending on the deposit structure, banks could be subject to disintermediation, bank runs, and deposits could quickly move from a financial institutions to the CBDC and as such, mitigation strategies are warranted. “To limit disintermediation risks and substitutability with bank deposits, Sand Dollar holdings do not earn interest, and a ceiling is in place limiting the amount users can hold in their wallets. Moreover, level 2 and 3 wallets are linked to accounts at financial institutions. To mitigate potential runs in case of stress, a circuit breaker has been embedded in the system to prevent massive flows,” the IMF paper stated.
• The Bahamas was the first country in the world to launch a CBDC, the Sand Dollar, in October 2020. The benefits of a digital currency were mostly linked to overcoming financial exclusion. However, the dollar remains less than 0.1 per cent of the currency in circulation and of broad money in The Bahamas.

(Source: The Nassau Guardian)

• The U.S. economy expanded at a 2.7% annual rate from October through December, a solid showing despite rising interest rates and elevated inflation, the government said Thursday in a downgrade from its initial estimate. The government had previously estimated that the economy grew at a 2.9% annual rate last quarter.
• The Commerce Department’s revised estimate of last quarter’s gross domestic product — the economy’s total output of goods and services — marked a deceleration from the 3.2% growth rate from July through September.
• More recent data issued this month, though, shows that the economy has since rebounded. Consumers boosted retail sales in January by the most in nearly two years, and employers added a surprisingly outsize number of jobs. The unemployment rate reached 3.4%, the lowest level since 1969.
• Inflation, measured year over year, has cooled since it reached 9.1% in June, having slowed to 6.4% in January. Yet on a monthly basis, price gains accelerated from December to January, raising the prospect that the Fed will raise its benchmark rate higher than it has previously signalled.
• Higher borrowing costs make mortgages, auto loans and credit card borrowing more expensive. Those higher rates could discourage consumers and businesses from spending, hiring and investing and could eventually push the economy into a recession.

(Source: AP News)

• British retail sales held steady in February after falling in January but stores expect sales volumes to slip again in March as the rising cost of living eats away at disposable incomes.
• The Confederation of British Industry's (CBI) distributive trades index rose to +2 this month from -23 in January. A Reuters poll of economists had pointed to a reading of -13. But a measure of expected sales in the month ahead fell to -18 from -15. Official data published last week showed shoppers spent more than expected in January but inflation-hit households were buying fewer items and relying more on discounts.
• Gabriella Dickens, an economist at Pantheon Macroeconomics, said the recovery in the CBI's sales measure this month would "likely prove a false dawn" as households are expected to spend less in the coming months as the risk of a recession looms.
• Its average selling price balance fell two percentage points to a still historically high +80 in the three months to February from +82 in the three months to the end of November. The Bank of England has signalled that it believes the tide is turning on Britain's inflation.
• Consumer price inflation eased to 10.1% last month after hitting a 41-year high of 11.1% in October. Economists polled by Reuters this month expect inflation to average 7.0% this year, and 2.6% in 2024.

(Source: Reuters)

• At its meeting on 16 and 17 February 2023, the Monetary Policy Committee (MPC) opted to maintain the policy interest rate at 7.0% and continue to maintain relative stability in the foreign exchange market. Jamaica’s inflation rate of 8.1% in January 2023 was below the rate of 9.4% at December 2022. Core inflation (which excludes food and fuel prices from the CPI) also decelerated to 7.1% at January 2023 from 8.5% at December 2022.
• The key external drivers of headline inflation, such as grains, fuel and shipping prices, continued to decline and the forecasts for these variables have been lowered. Consistent with global consensus forecasts for a fall in commodity prices and the Bank’s overall monetary policy stance, and in the absence of any new shocks, inflation is projected to continue to decelerate in 2023.
• This forecast envisages that annual inflation will fall within the Bank’s inflation target range of 4.0 to 6.0 per cent by the December 2023 quarter and remain generally at that level over the medium term. However, the near-term risks to the inflation outlook are elevated and skewed to the upside.
• While interest rates in the money and capital markets have generally increased in line with the policy rate, some deposit-taking institutions (DTIs) have, so far, made only marginal adjustments to their deposit and lending rates. With that said, the MPC decided to increase by one percentage point (pp) the domestic and the foreign currency Cash Reserve Requirements (CRRs) applicable to deposit-taking institutions (DTIs), effective 01 April 2023. This decision represents a part of the central bank’s efforts aimed at underpinning the return of inflation to its target range. Currently, DTIs are required to hold a minimum of 5.0% of their Jamaican dollar-denominated prescribed liabilities and 13.0% of their foreign currency-denominated prescribed liabilities as cash reserves at the central bank.
• The MPC reiterated that in the absence of new shocks, future monetary policy decisions aimed at returning inflation to the Bank’s target range, including further adjustments to the cash reserve requirement, will depend on the state of liquidity in the financial system and the continued pass-through effect of monetary policy on deposit and loan rates. The decisions will also depend on the MPC seeing more pass-through of international commodity price reductions to domestic prices and on the Fed continuing to slow its policy rate increases. The date of the next policy rate decision announcement is 29 March 2023.

(Source: BOJ)

• Fontana Limited recorded a net profit of $323.81Mn for the second quarter that ended December 31, 2022, representing a 30.1% yoy increase in profitability. Consequently, the company’s bottom line for the six months increased by 32.7% to $411.39Mn when compared to the same period in 2021.
• Revenues for the quarter were up by 15.1% yoy to a record-breaking $2.14Bn. Revenues for the six-month were $3.78Bn, representing a 19.5% increase when compared to the corresponding period of 2021. This was largely due to the increase in demand and expanded product offerings.
• Operating expenses were 29.9% higher ending the review period at $954.75Mn, driven by an increase in staff costs.
• Fontana’s stock price has decreased by 1.13% since the start of the calendar year. The stock closed Tuesday’s trading session at $8.83 and currently trades at a P/E of 15.5x which is below the Junior Market Distribution Sector Average of 17.2x.
• As part of its expansion plans, the company anticipates opening its Portmore store in the summer of 2023. The store is also expected to generate more revenue than the cost of developing the store within months given the strategic location and the growing population of the municipality.

 (Sources: JSE & NCBCM Research)