• The Central Bank of the Dominican Republic reported that the monthly indicator of economic activity (IMAE) registered an accumulated growth of 5.0% in January- November 2022 when compared to the same period the previous year, after incorporating the interannual variations of 3.8% in October and 2.9% in November of the current year.
• The Dominican economy’s trend throughout the year reflects a moderation in its growth rate in recent months, as increases of 6.1%, 5.1%, and 5.0% were recorded in the first three quarters of the year, respectively.
• The slowdown in domestic demand, primarily from the investment component, is due to high raw material and construction material costs, as well as the operation of the monetary policy transmission mechanism aimed at reducing inflationary pressures.
• In this regard, the results of the Central Bank forecast system indicate that actual gross domestic product (GDP) growth will be around 5.0% by the end of 2022. In terms of nominal GDP, it is expected to reach approximately US$113Bn, contributing to the consolidated public sector debt falling below 60% of GDP by the end of the current fiscal year.

(Source: Caribbean News Now)

• Contracts to buy U.S. previously owned homes fell far more than expected in November, diving for a sixth straight month in the latest indication of the hefty toll the Federal Reserve's interest rate hikes are taking on the housing market as the central bank seeks to curb inflation.
• This month, the Fed raised rates again by half a percentage point, capping a year that saw its benchmark rate shoot from near zero in March to between 4.25% and 4.5%.
• The National Association of Realtors (NAR) said on Wednesday, Dec. 28, its Pending Home Sales Index, based on signed contracts, fell 4% to 73.9 last month from October's downwardly revised 77.0. November's was the lowest reading - aside from the short-lived drop in the early months of the pandemic - since NAR launched the index in 2001.
• The housing market has suffered the most visible effects of aggressive Fed interest rate hikes that are aimed at curbing high inflation by undercutting demand in the economy. By the Fed's preferred measure, inflation is still running nearly three times its 2% goal, having risen earlier in 2022 at its fastest pace in 40 years.
• Unlike other parts of the economy - many of which have yet to show a significant impact from the Fed's actions - the housing market has reacted in near real-time to the jump in borrowing costs engineered by the central bank.

(Source: Reuters)

• Global equities edged lower on Wednesday, Dec. 28, while oil prices tumbled as investors weighed their enthusiasm about the potential economic boost from China lifting COVID restrictions with concerns about rising infections there.
• China's government announced on Monday, Dec 26, 2022, that it would stop requiring inbound travellers to go into quarantine starting from Jan. 8. While China's health system has come under heavy stress from the lifting of restrictions so far, strategists at JP Morgan forecast a "likely infection peak" during the Lunar New Year holiday next month, followed by a "cyclical upturn after nearly three years of on and off restrictions."
• MSCI's broadest index of global stocks was flat as investors stayed on the sidelines close to the end of a brutal year for equities. The global index is on course to end 2022 down about 20%, in its biggest percentage decline since 2008, during the financial crisis.
• Oil prices dipped as traders weighed concerns over the surge in COVID cases in China against the easing of restrictions in the world's top oil importer, which had fuelled some hopes for a demand boost. U.S. crude fell 2.34% to $77.67 per barrel and Brent was at $82.29, down 2.42% on the day.

(Source: Reuters)

• Consistent with its November 2022 announcement, the Monetary Policy Committee (MPC) has unanimously decided to maintain the policy interest rate at 7.00%, effective 21 December 2022. The MPC also decided to continue containing Jamaican dollar liquidity expansion and maintaining relative stability in the foreign exchange market.
• The MPC’s decision was based on the incoming data being generally favourable for the inflation outlook. Jamaica’s inflation rate at November 2022 of 10.3% was within the range of 9.5% to 10.5% expected by the Bank. Core inflation declined to 8.8% at November 2022 from 9.0% in October 2022.
• The key external drivers of headline inflation, such as grains, fuel and shipping prices, also continued to trend downwards and broadly in line with the Bank’s projections. In addition, as expected, the pace of monetary tightening by the United States Federal Reserve Board (Fed) appeared to be slowing.
• The December 2022 meeting of the MPC also noted that, while interest rates in the money and capital markets have generally increased in line with the policy rate, the response regarding interest rates from deposit-taking institutions has been slow. The Bank anticipates more material increases in deposit and lending rates in early 2023.
• In the absence of new shocks, the MPC noted that its future monetary policy decisions depend on the continued pass-through effect of its past policy rate changes on deposit and loan rates. The decisions also depend on the MPC seeing more pass-through of international commodity price reductions to domestic prices and on the Fed not exceeding its expected policy rate increases. 

(Source: BOJ)

• Jamaica and the International Monetary Fund (IMF) have reached a Staff Level Agreement that will enable the Government to access approximately US$1.7 billion under the IMF’s Precautionary and Liquidity Line (PLL) and Resilience and Sustainability Facility (RSF).
• This provision is being made at the Government’s request and forms part of the policy response to prevailing global shocks. The request is expected to be considered by the IMF’s Executive Board in early 2023.
• It will see the Government accessing approximately US$967 million under the PLL and about US$763 million through the RSF.
• The PLL will provide valuable insurance to Jamaica against downside risks, including those arising from extreme weather events, while the RSF will help support the country’s ambitious agenda to increase resilience to the effects of climate change, transition to a zero-carbon economy, and catalyse official and private climate-related financing.
• Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, in a statement, said that Jamaica is in a different era of economic development where the Government anticipates disruptive events and provides for them.
• The IMF, in a statement, said the Government’s response to the recent shocks associated with the COVID-19 pandemic has been “well designed” and “nimble” and aimed to contain inflationary pressures, support those worst hit by the increase in the cost of living, and steadily reduce the public debt. The organisation noted that the country’s efforts have facilitated a steady recovery in growth and job creation, despite the difficult global environment.

(Source: JIS

• Fitch Solutions will monitor the October economic activity prints for Colombia, and Mexico to assess the pace of easing economic growth in Q4 2022 and early 2023.
• Colombia remained a regional overperformer through Q3 2022, with pent-up demand driving robust private consumption growth in Q3 2022, underpinning Fitch’s 2022 forecast of 7.4% growth.
• However, a slowdown is anticipated in October through early 2023, as high-frequency indicators have begun to show weakness in Colombian production, which has been impacted by climbing inflation and Banco de la República's ongoing hiking cycle.
• In Mexico, however, high-frequency indicators point to continued resilience in the manufacturing sector, posing an upside risk to the growth forecast of 2.7% in 2022. That said, Fitch has maintained its view that the Mexican economy will grow just 1.0% in 2023 as interest rates remain elevated and US demand softens.

(Source: Fitch Solutions)

• The Board of Directors of the Central Bank of Costa Rica (BCCR) maintained the policy rate at 9% on Dec. 14. The BCCR previously raised the policy rate for a cumulative 825bps across eight consecutive meetings beginning back in December 2021.
• The decision to maintain the policy rate reflects the three consecutive months of declining headline and core inflation as well as the fall in inflation expectations. The headline and core inflation were 8.3% and 5.7% as of November 2022 respectively, while 12-month inflation expectations reached 6%.
• The restrictive policy rate has been deemed effective following the recent decline in inflation, with BCCR noting its expectation to remain in this position to mitigate risks towards the convergence of inflation to the central bank’s 3% target band.
• The improved data led the BCCR to revise its inflationary outlook, with the expectation for headline inflation to now reach the target band some time in H1 2024 compared to H2 2024 from the previous monetary policy meeting.
• Headline inflation is now 390bps below its peak August 2022 level. Monthly economic activity data from October show a further slowdown in the Costa Rican economy, which coincides with the easing of inflation. Economic activity moderated to 2.2% y-o-y in October compared to the 4.9% y-o-y growth through the first ten months.

(Source: LATAM & Caribbean Weekly)

• European Union energy ministers on Monday, Dec. 19 agreed on a gas price cap after weeks of talks on the emergency measure that has split opinion across the bloc as it seeks to tame the energy crisis. The cap is the 27-country EU's latest attempt to lower gas prices that have pushed citizens' energy bills higher and driven record-high inflation this year after Russia cut off most of its gas deliveries to Europe.
• Ministers agreed to trigger a cap if prices exceed 180 euros per megawatt hour for three days on the Dutch Title Transfer Facility (TTF) gas hub's front-month contract, which serves as the European benchmark, EU officials and a document seen by Reuters showed.
• The cap can be triggered starting from Feb. 15 2023, the document detailing the final deal showed. The deal will be formally approved by countries in writing, after which it can enter into force. Once implemented, it would prevent any trades on the front-month to front-year TTF contracts at a price more than 35 euros/MWh above a reference level based on existing liquefied natural gas (LNG) price assessments, two EU officials told Reuters.
• The deal follows months of debate on the idea and two previous emergency meetings that failed to clinch an agreement among countries that disagreed on whether a price cap would help or hinder Europe's attempts to contain the energy crisis.

(Source: Reuters)

• The Biden administration said Friday, Dec. 16, it is buying 3 million barrels of oil to begin to replenish U.S. strategic reserves that officials drained earlier this year in a bid to stop gasoline prices from rising amid production cuts by OPEC and a ban on Russian oil imports. Global oil prices were rising even before Russia invaded Ukraine last February. When Biden announced a ban on Russian oil imports in early March, he acknowledged it would come at a cost to American consumers.
• President Joe Biden withdrew 180 million barrels from the Strategic Petroleum Reserve starting in March, bringing the stockpile to its lowest level since the 1980s. The reserve now contains roughly 400 million barrels of
• The purchase, to begin in January, will start to replenish the reserve and is likely to be followed by additional purchases, officials said. Contracts for the purchase will be awarded by Jan. 13, with deliveries to an SPR site in Texas expected in February.
• The Energy Department called the purchase “a good deal for American taxpayers″ since the price will be lower than the $96 per barrel average the U.S. oil was sold for. The replenishment also will strengthen U.S. energy security, the department said in a statement. The purchase price was not announced, but benchmark West Texas Intermediate crude oil was selling at $74.50 per barrel late Friday. Gasoline prices, meanwhile, averaged about $3.18 per gallon on Friday, down from $3.74 a month ago and just over $5 per gallon at their peak in June, according to the AAA auto club.

(Source: AP News)

• For November 2022, the All-Jamaica Consumer Price Index (CPI) increased by 0.4%. Furthermore, November’s point-to-point inflation of 10.3% showed an uptick relative to October’s point-to-point inflation figure of 9.9%.
• For November, the rise in monthly inflation was largely driven by the 2% increase in the heavily weighted ‘Food and Non-Alcoholic Beverages’ division. All classes within the ‘Food and Non-Alcoholic Beverages’ division increased for the review period with the main contributor being ‘Vegetables, tubers, plantains, cooking bananas and pulses’ which rose by 6.5%. This was due to higher prices for agricultural produce such as sweet potato, tomato, cabbage and sweet pepper
• Though there was an uptick in the point-to-point outturn in November, the current rate of 10.3% is keeping with expectations, as the BOJ noted that inflation was projected to stabilize in the range of 9.0% to 11.0% for the remainder of 2022. 
• On December 20, 2022, the BOJ will have its monetary policy meeting, however, at its last meeting, it was deemed appropriate to pause further policy rate increases and watch the previous rate hikes pass through to deposit and loan rates. Consequently, despite the slight increase in point-to-point, we expect the BOJ to maintain its policy rate at 7.00%.  

(Source: STATIN and NCBCM Research)