• The Bank of England launched a historic intervention to stabilize the U.K. economy, announcing a two-week purchase program for long-dated bonds and delaying its planned gilt sales until the end of October.
• The move came after a massive sell-off in U.K. government bonds — known as “gilts” — following the new government’s fiscal policy announcements on September 23. The policies included large swathes of unfunded tax cuts that have drawn global criticism, and also saw the pound fall to an all-time low against the dollar ($1.035) on Monday, September 26.
• The decision was taken by the bank’s Financial Policy Committee (FPC), which is chiefly responsible for ensuring financial stability, rather than its Monetary Policy Committee.
• To prevent an “unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy,” the FPC said it would purchase gilts on “whatever scale is necessary” for a limited time.
• Central to the bank’s extraordinary announcement was panic among pension funds, with some of the bonds held within them losing around half their value in a matter of days. The plunge in some cases was so sharp that pension funds began receiving margin calls — a demand from brokers to increase equity in an account when its value falls below the broker’s required amount.
• Long-dated bonds represent around two-thirds of Britain’s roughly £1.5Trn ($1.6Trn) so-called liability-driven investment funds, which are largely leveraged and often use gilts as collateral to raise cash. In its emergency purchase of long-dated gilts, the Bank of England is setting out to support gilt prices and allow LDIs to manage the sale of these assets and the repricing of gilts in a more orderly fashion, to avoid a market capitulation.

(Source: CNBC)

• Cabinet has approved the development of a National Employment Policy by the Office of the Prime Minister (OPM) to facilitate several modalities of worker engagement.
• Speaking during a recent Post-Cabinet Press Briefing, Minister without Portfolio in the OPM with Responsibility for Information, Hon. Robert Morgan, said the policy “will also target youth who are not academically qualified but still trainable”.
• The Cabinet decision comes against the background of the cost associated with working individuals travelling long distances daily to get to urban centres such as the Kingston Metropolitan Area (KMA), where their jobs are located, which is often deemed unfeasible. It is also made in light of increased informal settlements in the KMA and other areas, due to migration.
• Consequent on these factors, it is anticipated that the policy will improve the employment rate in communities and curb increased engagement in informal industries.

(Sources: JIS)

• While inflation in some DMs may continue to accelerate into next year, Fitch believes that inflation in most major EMs will ease over the remainder of this year. The pace of the decline will be gradual-- among major Ems, inflation will slip from 7.6% y-o-y in September to 6.9% y-o-y in December.
• While electricity and natural gas prices remain elevated in some DMs, this challenge is – for the most part –limited to Europe. For most EMs, the energy price that has had the biggest effect on inflation has been oil, which shot up in early 2022 as a result of Russia’s invasion of Ukraine.
• Oil prices have, however, eased recently. Given the base effects caused by high oil prices in late 2021 and early 2022, it is expected that the year-on-year growth of oil prices (which is what matters for inflation) will weaken over the coming months, and will turn negative in early 2022
• Despite this disinflationary trend, Fitch expects that inflation will remain elevated in 2023. However, if Mainland China is excluded from the calculation, then EM inflation will slip from 14.9% in 2022 to 11.4%, but this is still much higher than the 6.4% recorded between 2015 and 2019.

(Source: Fitch Solutions)

• Brazil's consumer prices extended their downward trend during in the month to mid-September, government statistics agency IBGE said on Tuesday, as fuel costs continued to drop on the back of lower taxes and price cuts by state-run oil firm Petrobras.
• Inflation in the 12 months to mid-September hit 7.96%, well below the 8.14% forecasted by economists, likely backing the central bank's recent decision to pause its aggressive rate hiking cycle.
• In August, Latin America's largest economy posted the lowest mid-month inflation rate in about three decades; however, this month's drop was driven by the transportation sector, in which costs fell 2.35%.
• Notably, the inflation drop in September was not widespread as prices fell in only three of the nine groups of products and services surveyed - communication, food and beverages, and transportation.
• The latest inflation data comes as Brazil's central bank last week chose to keep interest rates unchanged at 13.75%, pausing an aggressive tightening after 12 consecutive increases aimed at curbing high inflation.
• William Jackson, the chief emerging markets economist at Capital Economics, said the inflation figures confirmed that the monetary tightening cycle was over. “However, the fact that inflation remains very strong supports our view that the central bank will wait until the middle of next year before turning to interest rate cuts," he added.

(Source: Reuters)

• “Inflation is too high in Canada, so the Bank of Canada needs to increase interest rates to slow spending and give the economy time to catch up,” Governor Tiff Macklem said on Monday in a video posted by the central bank on Twitter.
• "Inflation is too high," Macklem said, echoing remarks made earlier this month after the central bank hiked its policy rate by 75 basis points to 3.25%. "It is important that we get inflation back down so Canadians can plan their spending and their savings, and they don't get surprised by big changes in their cost of living."
• The Bank of Canada, like many of its global peers, is rapidly increasing interest rates in response to inflation running at levels not seen in decades. But the bank has faced public criticism for increasing borrowing costs at a time when many Canadians are already struggling to afford groceries and other essentials. "It is by raising interest rates that we're going to slow spending in the economy, give the economy time to catch up and take the steam out of inflation," Macklem said in the video. "That's gonna get inflation back down."
• The central bank has lifted rates by 300 basis points in just six months as it looks to wrangle inflation back to the 2% target. Canada's inflation rate edged down to 7.0% in August from 8.1% in June and 7.6% in July.

(Source: Reuters)

• An ally of President Vladimir Putin issued a stark new nuclear warning to Ukraine and the West on Tuesday as Russia began releasing results of referendums it bills as a prelude to it annexing four Ukrainian regions.
• Moscow's latest broadside came as European countries rushed to investigate unexplained, major leaks in two Russian natural gas pipelines under the Baltic Sea, which posed risks of explosions and the sinking of any ships that enter the area.
• The Kremlin, which has blamed technical problems for earlier cuts in Russian gas supplies to Europe, said it could not rule out sabotage, without saying who was to blame.
• Russia's confrontation with the West has driven up global inflation and sharpened energy and food crises in many countries since its Feb. 24 invasion of Ukraine, which was met by tough Western sanctions and Russian retaliatory measures.
• Analysts say they are designed to deter Ukraine and the West by hinting at a readiness to use tactical nuclear weapons to defend newly annexed territory, where Russian forces have faced strong Ukrainian counteroffensives in recent weeks.

(Source: Reuters)

• Global outsourcing company Intelcia officially opened its first Caribbean office in Kingston on Thursday (September 22). Intelcia is a global player in outsourcing offering solutions in four main areas – business processes, information technology (IT), innovative consulting, and multichannel customer experience (CX). The company, based in New Kingston, now employs 600 Jamaicans, with more persons to be engaged as the entity continues to build out its staff complement.
• Intelcia joins more than 70 firms operating in Jamaica’s global services sector, which has continued to thrive despite the disruption caused by the COVID-19 pandemic. Industry, Investment and Commerce Minister, Senator the Hon. Aubyn Hill added that Jamaica’s global services sector has been averaging a 20% employment growth, which is among the highest in the world.
• Additionally, it is one of the fastest-growing economic sectors in the country. The resilience of the sector, the Minister said, is further evidenced by the 8.7% growth rate last year, and 5.7% in the last quarter. With further investments expected in the sector considering Jamaica’s geographic positioning, and its English-speaking, educated and trainable population, the BPO sector is forecast to be one of Jamaica’s high-growth sectors for the foreseeable future that will aid in job creation and contribute to economic growth.

(Sources: JIS and NCBCM Research)

• Fitch forecasts 5.9% real GDP growth in Barbados in 2022, driven by the revival of the international tourism sector.  In 2021, the economy grew 5.0%, a revision from the previous estimate of 1.6% due to additional government data releases for 2021, which showed a faster recovery from the pandemic-induced recession than was expected.
• Growth in 2022 will be driven primarily by a continued recovery in Barbados’ tourism sector. This will underpin real export growth of 9.5% in 2022, and 7.0% in 2023.
• Private consumption will grow 5.5% in 2022 and 3.0% in 2023, from 8.4% in 2021, as a stronger tourism sector will continue to boost employment levels in the hospitality sector and drive household spending. As a result, Fitch expects unemployment will continue to moderate in the months ahead.
• In 2023, it is forecasted that inflation will come down in the second half of the year, but it will still average 6.0% for the year as a whole. With elevated inflation in 2022 and the beginning of 2023, it is expected that private consumption will steadily slow in the quarters ahead.
• Central banks in Barbados’s key tourism source markets are likely to continue raising interest rates aggressively to battle historically high inflation. Should economic conditions in these markets deteriorate more severely than expected, Barbados’s post-COVID economic recovery could stall.
• Additionally, if slower global growth heavily impacts Barbados’s tourism sector, weaker growth would also likely delay the government’s push to bring down its debt in accordance with its IMF agreement, potentially forcing the government to make deeper spending cuts in the long term that limit the economy’s growth potential.

(Source: Fitch Solutions)

• CARICOM is launching a major regional platform to facilitate intra-regional trade in goods and agricultural products.
• This CARICOM Marketplace dubbed CIMSUPRO (CARICOM Market Place and Suspension Procedure) will register suppliers and buyers of Caribbean Community (CARICOM) originating goods.
• CIMSUPRO when populated will create a ‘Marketplace’ that will allow regional buyers to find sellers of regionally produced goods, thereby creating the conditions for direct contact between parties.
• The online platform also has the potential for improving the efficiency of the application process for a suspension of the Common External Tariff (CET).
• The platform will help to build the resilience of regional economies by increasing intra-regional trade and supply of goods, especially food, and reducing the high and unsustainable dependence on imports.

(Source: CARICOM TODAY)

• The Bank of England said on Monday it would not hesitate to change interest rates and was monitoring markets "very closely", after the pound plunged to a record low and British bond prices collapsed in response to the new government's financial plans.
• Finance minister Kwasi Kwarteng sent sterling and government bonds into freefall on Friday with a so-called mini-budget that was designed to grow the economy by funding tax cuts with huge increases in government borrowing.
• Such was the market turmoil on Monday that there was growing speculation in financial markets that the BoE would make an emergency interest rate rise after it hiked rates only last week to 2.25% from 1.75%.
• Instead, with the pound fragile and bond prices still tumbling, Kwarteng issued a statement just before the British stock market closed to say he would set out medium-term debt-cutting plans on Nov. 23, alongside forecasts from the independent Office for Budget Responsibility of the full-scale government borrowing.
• S. Federal Reserve official Raphael Bostic said the market moves could lead to greater economic stress in Europe and the United States, while analysts and investors said the government had done the bare minimum to reassure markets.

(Source: Reuters)