• The Federal Reserve raised interest rates by a quarter of a percentage point on Wednesday, citing still elevated inflation as a rationale for what is now the highest U.S. central bank policy rate in 16 years. The rate hike, the Fed's 11th in its last 12 meetings, set the benchmark overnight interest rate in the 5.25%-5.50% range, and the accompanying policy statement has left the door open to another increase.
• "The Federal Open Market Committee will continue to assess additional information and its implications for monetary policy," the Fed said in language that was little changed from its June statement and left the central bank's policy options open as it searches for a stopping point to the current tightening cycle.
• "The forward guidance remains unchanged as the committee leaves the door open to further rate hikes if inflation does not continue to trend lower," said Kathy Bostjancic, chief economist at Nationwide. "Our view is the Fed is likely done with rate hikes for this cycle since continued easing of inflation will passively lead to tighter policy as the Fed holds the nominal fed funds rate steady into 2024."
• Core inflation remains more than double the Fed's target, and the economy by many measures, including a low 3.6% unemployment rate, continues to outperform expectations even amid rapid increase in interest rates.
• Job gains remain "robust," the Fed said, while it described the economy as growing at a "moderate" pace, a slight upgrade from the "modest" pace seen as of the June meeting. The U.S. government on Thursday is expected to report the economy grew at a 1.8% annual pace in the second quarter, according to economists polled by Reuters.
• However, with about eight weeks until the next Fed meeting, a longer-than-usual interlude, continued moderation in the pace of price increases could make this the last rate hike in a process that began with a cautious quarter-percentage-point increase in March of 2022 before accelerating into the most rapid monetary tightening since the 1980s.

(Source: Reuters)

• Europe's major banks, including Deutsche Bank and Lloyds Banking Group, on Wednesday pointed to the rising risk of bad loans as the global economy struggles with slow growth and high inflation.
• Financial regulators and investors are keeping a close eye on how banks navigate the uncertain economic climate and are looking in particular for any signs of stress in banks' loan books.
• The latest flurry of bank earnings in Europe highlighted broader trends in global banking, where investment banks are under pressure due to a deal drought, while higher interest rates are helping profitability in retail banking. Lloyds took a higher charge for troubled loans and missed first-half profit expectations as Britain's economic chills weighed on its finances and upped pressure on management to do more to help savers.
• The International Monetary Fund this week raised its 2023 global growth estimates slightly given resilient economic activity in the first quarter, but said that persistent challenges were dampening the medium-term outlook. Inflation was coming down and acute stress in the banking sector had receded, it said, but the balance of risks facing the global economy remained tilted to the downside and credit was tight.
• The European Central Bank also this week reported that eurozone companies' demand for loans dropped to the lowest on record last quarter and a further decline is likely over the summer as banks continue to tighten access to credit.

(Source: Reuters)

• Supreme Ventures Limited (SVL) has acquired a 15 per cent stake in micro-financing company Dolla Financial Services
• SVL, which currently operates a gaming and lottery business as well as the horse racing operation at Caymanas Park, St. Catherine, made the disclosure to the Jamaica Stock Exchange on Monday, July 24, 2023.
• The acquisition means that SVL now owns 375 million units of Dolla Financial’s 2.5 billion ordinary shares outstanding. According to Tuesday's closing price, the company's shareholding is valued at just over J$892.5 million.
• This move continues to be in alignment with SVL’s growth strategy which has expanded beyond the gaming market and has been making headway into other growth industries with significant potential to meet the ever-growing needs of an eclectic consumer base.

(Sources: JSE and RJR News)

• The Government has agreed to provide Windalco with a two-year relief from the payment of the bauxite production levy, which will save the jobs of hundreds of Jamaicans. Jamaica will forego an estimated US$10 million in levy payments from the company over the period.
• Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, made the announcement during a statement to the House of Representatives on July 19. He highlighted that the waiver is about jobs and foreign exchange, whereby the plant would close and relatively high-paying jobs would be lost if this waiver is not granted.  Windalco currently employs 600 persons directly and 1,187 others indirectly.
• Windalco has committed to producing alumina in terms of volume, at a level that is 10 per cent higher than what was produced in 2022. During this period, the government will seek to revise the bauxite production levy regime to make Jamaica more competitive in this industry.
• This 2-yr waiver will allow Windalco the latitude it will need to put in place the systems to make their business viable. In the past few years, the company has been faced with serious challenges including an extremely high cost for producing alumina, coupled with the “very uncompetitive” cost for the product on the world market, and as such Windalco has experienced losses.
• The Government has made commitments to ensure that a payment schedule is developed for all outstanding amounts owed by Windalco for bauxite levy accruing from previous periods. However, this levy relief could impair government revenues over the next two years. 

(Source: JIS)

• Consumer prices in Brazil fell by more than expected in the month to mid-July, data from statistics agency IBGE (The Brazilian Institute of Geography and Statistics) showed on Tuesday, as markets brace for an interest rate cut when the central bank monetary policy committee meets next week.
• In Latin America's largest economy, the Extended National Consumer Price Index fell 0.07% in the period, down from 0.04% in the previous month and below the 0.01% drop expected by economists polled by Reuters.
• That took 12-month inflation in the country to 3.19%, while economists had projected it to come in at 3.26%.
• The annual figure remains below the central bank's inflation target of 3.25% for this year, although an uptick is expected from this month because of unfavourable base effects.
• IBGE said the deflation in the month to mid-July was mainly driven by lower housing, food and beverage costs, whose declines were partially offset by an increase in transportation prices.

(Source: Reuters)

• Fitch Solutions is maintaining its FY24 real GNP forecast for Puerto Rico of a 0.6% contraction; however, it has revised Puerto Rico’s FY23 growth estimate from 0.5% to 1.0%.
• The Junta de Planificacion has published preliminary FY22 (July 2021 – June 2022) GNP data which came in at 3.7% growth, higher than Fitch’s estimate of 2.1%. This reflected stronger than expected private consumption (8.5%) and fixed investment (35.5%) growth, the latter supported by financial capital inflows from the US federal government.
• This has contributed to the upward revision of the 2023 estimate as Fitch believes that US financial flows will continue to contribute to the Puerto Rican industrial manufacturing sector, as well as the construction industry.
• Additionally, due to evolving expectations of a US economic recession starting in late 2023 or early 2024, Fitch expects weaker US demand in the latter half of FY24 will translate into headwinds for Puerto Rican exports and private consumption, while elevated interest rates will weigh on gross fixed capital formation.
• Risks to the growth outlook are balanced by the threat of a severe weather event through H223 and the rising likelihood of the US ‘soft landing’ in H124. The Fed has signalled that it may decide to shift its monetary policy stance, even if it does not see a significant uptick in unemployment, as long as the headline and core inflation start to moderate in the coming months. If this plays out, interest rates come down faster than expected and lower unemployment materializes in early 2024, which would support demand for Puerto Rican goods and tourism exports.

(Source: Fitch Solutions)

• U.S. stocks rose on Tuesday on investors' renewed enthusiasm for expected earnings reports from mega-cap technology companies Alphabet and Microsoft amid signs of economic resilience. A survey showed consumer confidence increased to a two-year high in July, amid continued optimism about the labour market despite worries about a recession.
• U.S. tech giants are expected to signal an end to a nearly year-long slowdown in their cloud businesses as technology spending and digital ads are likely to pick up. Investor fascination with artificial intelligence is a positive influence for mega-cap tech firms, said Steve Sosnick, chief strategist at Interactive Brokers. "When you have this much enthusiasm for a specific investing theme, you don't need much of a reason for markets to move. It's inertia."
• With the U.S. central bank on track for another 25-basis point interest rate hike on Wednesday, policymakers face a choice over how much weight to put on recent economic data. The tech-heavy Nasdaq Composite index has rallied nearly 35.2% this year, helped by outsized gains in rate-sensitive mega-cap growth companies on optimism over artificial intelligence and hopes of an end to the U.S. Federal Reserve's tightening cycle.
• "Tech sold off horribly in 2022, so it's no surprise that it has come back so strong because investors believe the Fed is either done or close to being done with its tightening cycle and that's all the market wants," said M. Jake Dollarhide, chief executive officer at Longbow Asset Management.

(Source: Reuters)

• The Bank of Canada's most favoured measures of core inflation is likely to slow in July for the first time in 10 months as base effects work in their favour, a milestone that could sway the bank to leave rates on hold at its next policy decision.
• In tracking core inflation, the BoC has been particularly focused on the annualized three-month rates of the weighted median and the trimmed mean, which filter out components with extreme price movements and are more timely than the year-over-year rates that are typically observed. The average of those two measures would drop in July below the 3.5% to 4% range it has been stuck in since September, so long as the monthly increases are not too hot - above 0.3%, for example - Reuters calculations show.
• The monthly increases for both measures have been 0.3% or less in seven of the last eight months. The exception was April. Helpfully, its heated readings will drop out of three-month calculations in July. Such an outcome could see the BoC returning to the sidelines at its next interest rate announcement on Sept. 6, said Benjamin Reitzes, Canadian rates & macro strategist at BMO Capital Markets.
• Holding rates steady in September would not guarantee the tightening cycle has ended, economists say, noting that monthly increases of 0.2% and less for the preferred core measures would need to become commonplace for inflation to move back to the BoC's 2% target.
• The BoC, which will release minutes from its July meeting on Wednesday, has said it doesn't want to tighten more than is needed. Money markets see a 25% chance of a September hike and are pricing in a 75% chance of a move by the end of the year.

(Source: Reuters)

• AMG Packaging & Paper Limited recorded a net profit of $32.56Mn for the third quarter that ended May 31, 2023. This represents a 19.2% yoy increase in profitability. However, despite this increase, profit for the nine months ending May 2023 decreased by 6.7% to $74.80Mn due to the fall-off in its quarter-one performance.
• Revenue for the quarter was up by 11.7% yoy to $281.02Mn. Similarly, revenues for the nine months increased by 5.9% yoy $781.84Mn.
• Gross profit for the quarter was up 39.7% to $88.57Mn while for the nine months ending May 31, 2023, it's up 17.8%. This was primarily driven by an increase in its property insurance as well as the major servicing of its corrugator.
• Despite this increase, gross margin improved to 31.5% (from 25.2%) and  29.9% (from 26.9%), over the three and nine months periods, respectively as the rate of the sales increase outpaced increases in manufacturing cost.
• Total expenses for the nine months ending May 31, 2023, increased by 25.0% yoy to $131.31Mn. Total expenses for the quarter increased by 20.6% yoy to $43.52Mn. The main contributing factors were the increase in depreciation as well as the cost associated with participating in the Jamaica Manufacturers and Exporters Association (JMEA) EXPO.
• AMG’s stock price has decreased by 13.5% since the start of the calendar year. The stock closed Tuesday’s trading session at $2.51 and currently trades at a P/E of 13.2x which is below the Junior Market Manufacturing Sector Average of 18.8x.
• The company recently pulled back from its plan to produce boxes made from recycled paper because the expected cost savings are anticipated to be slim. Additionally, the company has been challenged with the timely shipment of its raw material and has been closely monitoring the situation so that sales are not affected. As such, the company has around three months’ worth of inventory which should be able to sustain production until the next shipment arrives.

(Source: JSE)

• To finance several development projects as Guyana continues to progress rapidly, the Government of Guyana intends to increase the country’s debt ceiling, a Senior Minister within the Office of the President with responsibility for Finance, Dr. Ashni Singh has said.
• Dr Singh, during an interview with the News Room, said that the government has been making significant investments and managing the country’s finances responsibly.
• “Given all of these heavy investment initiatives and also ramping up of social programmes, we have of course been incurring a fiscal deficit, this is publicly known. It’s reflected in our annual budget every year, so you finance the budget deficit by borrowing, and we have been borrowing very prudently,” the minister said.
• With Guyana’s rapidly growing economy, it is pertinent that the country adjusts its debt ceiling.
• Guyana’s fiscal deficit is expected to widen from 2.2% of GDP in 2022 to 3.0% in 2023 given falling global energy prices and the government’s planned 41.4% increase in headline expenditure over the year. However, the country is anticipated to record a surplus (0.1% of GDP) in 2024 due to stabilising oil prices, persistent increases in hydrocarbon production and a lower debt-to-GDP ratio.
• This forecast is heavily hinged on a low debt load. Guyana’s debt-to-GDP ratio stood at just 25.8% in 2022, having fallen from a multi-year peak of 47.4% in 2020. Persistent fiscal surpluses from 2024 onwards imply that this ratio will stabilise in the years ahead, averaging 25.6% between 2023 and 2027.

(Source: Guyana Chronicle)