• Mexican inflation is expected to have moderated in October but remained well above the central bank's target, likely cementing forecasts that monetary policymakers will again hike the benchmark interest rate.
• Inflation has blown past the Bank of Mexico's target rate of 3%, plus or minus one percentage point, prompting it to increase its key lending rate by a cumulative 525 basis points to 9.25% during the current hiking cycle, which began in June 2021.
• The central bank's latest monetary policy decision will be announced on November 10, when it is expected toraise its key interest rate by 75 basis points, following the U.S. Federal Reserve's three-quarters of a percentage point hike on November 2.
• However, the closely watched annual core inflation rate, which strips out some volatile food and energy prices, slowed to 8.41% in the 12 months through October, coming in slightly below the 8.44% forecast from analysts at Reuters.
• Despite decelerating from the 8.7% annual rate seen last month, Mexico's inflation remains well above target and markets forecast a fresh 75 basis-point interest rate hike to 10% this week.

(Source: Reuters)

• Oil prices slipped on Tuesday, November 8, as recession concerns and worsening COVID-19 outbreaks in top crude importer China heightened fears of lower fuel demand.
• Brent crude was down 93 cents, or 1%, at $96.99 a barrel, while U.S. West Texas Intermediate (WTI) crude was $1.16, or 1.3%, lower at $90.63.
• Both benchmarks hit their highest since August on Monday amid reports that leaders in China were weighing an exit from the country's strict COVID-19 restrictions.
• However, new coronavirus cases have surged in Guangzhou and other Chinese cities, dimming the outlook for fewer restrictions.
• "It is worth recalling that China’s zero tolerance towards flare-ups of COVID infections was the main reason behind last month’s sizeable downward revision in the world’s oil demand by the International Energy Agency," said PVM analyst Tamas Varga.

(Source: Reuters)

• The U.S. Federal Reserve's ongoing balance sheet drawdown has exacerbated low liquidity and high volatility in the $20-Trn U.S. Treasury debt market, raising questions on whether the Fed needs to re-think this strategy.
• Intended to drain stimulus pumped into the economy during the COVID-19 pandemic, the Fed's quantitative tightening (QT), as it is commonly referred to, has been running for the last five months. The Fed's balance sheet though remains at a lofty $8.7Trn, down modestly from a peak of nearly $9Trn.
• Since September, the Fed has planned to allow $95Bn in balance sheet runoff, meaning it would no longer reinvest the principal and interest payments received from maturing U.S. Treasuries and mortgage-backed securities.
• However, there are underlying liquidity and volatility problems in U.S. Treasuries amid the Fed's aggressive rate hike cycle. The problems can also be traced to long-running structural issues arising from U.S. banking regulations created in the aftermath of the 2008 global financial crisis.
• While the Fed is determined to reduce its balance sheet, if the problems facing investors get out of control, some analysts said the Fed may just halt or suspend it.
• UBS economists said last month the Fed's balance sheet runoff will face several complications through 2023, prompting the Fed to sharply slow or fully stop balance sheet reduction sometime around June 2023.

(Source: Reuters)

• Following a robust post-pandemic recovery, Fitch Solutions expects GDP growth in Jamaica to gradually moderate over the medium term, averaging 2.4% a year over 2022-2031. Tourism and the services sector will remain key drivers of economic growth over the forecast period, with agriculture and manufacturing playing an increasingly important role.
• Household spending in Jamaica will remain by far the largest component of economic activity on the back of high remittance inflows and rising employment. While growth is forecasted, relatively weak investment will make private consumption a greater contributor to the economy.
• In the short term, consumption growth will be limited by elevated inflation and rising borrowing costs. Fitch expects that government consumption as a percentage of GDP will decline moderately over the next decade. The Jamaican government will continue to exercise fiscal restraint, adhering to IMF-prescribed policies aimed at reducing the national debt.
• In terms of Investments, gross fixed capital formation accounted for an estimated 24.0% of GDP in 2021. In the medium term, Fitch expects to see a moderate rise in investment as a share of economic output as tax reductions help spur investment, particularly in the tourism sector. Over the long term, structural weaknesses such as corruption, crime, poor infrastructure and an unskilled labour force will weigh on investment.
• For Net Exports, Jamaica will run a sizeable trade deficit throughout Fitch’s 10-year forecast period due to its dependency on imported goods. This will be partially offset by a surplus in the services balance due to tourism earnings. The country's deficit in goods and services was 14.0% of the total GDP in 2019 and increased to an estimated 20.7% of the GDP in 2021. 

(Source: Fitch Solutions)

• Fitch forecasts that Peru’s current account deficit will narrow from 3.3% in 2022 to 2.3% in 2023, as income support measures sustained more robust import demand through Q3 2022 than anticipated.
• In the coming months, as fiscal stimulus measures expire and economic headwinds mount, import demand is expected to ease. While a global slowdown will also dampen export growth, recovering demand from China for Peruvian copper will prevent a more rapid slowdown. This will result in a wider goods trade surplus, which is forecasted to reach USD18.3Bn in 2023, from USD14.6Bn in 2022.
• Export growth will ease more modestly, from 12.7% in 2022 to 10.2% in 2023. Goods exports were up 12.6% in the year through August, as the price of metals and oil – which combined, account for approximately 70% of the Peruvian export basket – remained elevated.
• Peru’s primary account deficit will remain stable at 8.0% of GDP in 2023. Historically, Peru’s business-friendly environment has sustained investment in the mining sector and supported robust profit repatriations for foreign-owned firms. However, softer growth and lower copper prices in the coming months will cap funds that companies have to send abroad.
• Growing foreign direct investment (FDI) inflows and a stable stock of international reserves will allow the country to continue financing its current account shortfall. In addition, as of September 2022, the Banco Central de Reserva del Perù (BCRP) held USD74.2Bn in reserves (18.4 months of import cover). 
• While this marks a gradual decline from the peak of 27.4 months of import cover held during March 2021, Fitch expects this plentiful reserve stock will be sufficient in maintaining Peru’s external account stability in the event of a balance of payments shock.

(Source: Fitch Solutions)

• Environmentalists have long insisted that Guyana’s oil and gas would be better left unexploited due to the lopsided deal the country received for its largest oil block and more importantly, the environmental destruction caused during the production of the resources.
• The World Bank in its latest Fact Sheet on Guyana has warned that the country is at ‘high risk of climate-induced hazards’ as a result of the massive oil discoveries off the country’s coast. According to the report, heavy rainfall and related occurrences of flooding, sea level rise, and storm surges, especially in coastal areas are expected in Guyana.
• “Guyana’s contribution to climate change is expected to increase due to the oil and gas discovery, which could ultimately hinder growth and development efforts in the country if left unchecked,” the global institution pointed out.
• The World Bank was also keen to note that, “Guyana’s coastal plain strip lies below the mean high tide mark and has historically suffered flooding from both Atlantic storm surges and heavy rains.” Consequently, Guyana’s efforts to become the ‘food basket of the Caribbean’ – given its role in reducing the Region’s Food Import Bill by 25% by 2025 – could be hindered due to the massive oil and gas projects that are to be pursued.
• Notwithstanding, the financial institution noted that the country’s Low Carbon Development Strategy (LCDS) 2030 outlines substantial measures to support green resilient growth, including increased protection for the standing forests and investments in renewable energy sources such as hydropower and solar energy.

(Source: Kaieteur News)

• British house prices fell in October at the fastest monthly rate since February 2021, a fresh sign of weakness in the housing market that reflects the fallout from the September "mini-budget", mortgage lender Halifax said on Monday, Nov. 7.
• House prices declined 0.4% month-on-month last month, after a 0.1% fall in September, Halifax said.
• It reported that the slowdown was in part a consequence of the Sept. 23 economic agenda of former Prime Minister Liz Truss, known as the mini-budget, which sent British financial markets into a free-fall.
• "While a post-pandemic slowdown was expected, there’s no doubt the housing market received a significant shock as a result of the mini-budget which saw a sudden acceleration in mortgage rate increases," said Kim Kinnaird, director of Halifax Mortgages.
• In annual terms, house prices were 8.3% higher in October, slowing from 9.8% in September.

(Source: Reuters)

• The European Union has “serious concerns” about the U.S. Inflation Reduction Act, saying it breaches international trade rules.
• The sweeping tax, health, and climate bill was approved by US lawmakers in August and includes a record $369Bn in spending on climate and energy policies. The landmark package comprises tax credits for electric cars made in North America and supports U.S. battery supply chains.
• European officials have acknowledged the green ambitions associated with the package, but they are worried about “the way that the financial incentives under the Act are designed,” which will be presented to U.S. officials.
• In essence, the EU is worried about potential new trade barriers on European electric vehicle producers. And they are not the only ones, South Korea, for instance, has also brought up the same concern.
• Ngozi Okonjo-Iweala, director general of the World Trade Organization, said Monday that countries need to be “very careful that whatever policies [they] are taking should not be discriminatory, and should not favour domestic goods.”

(Source: CNBC)

• Fitch Solutions revised up Jamaica’s real GDP growth forecast for 2022 to 3.6% from a previous 2.9%, on the back of a strong rebound in international tourism. Latest data show real growth came in at a relatively robust 4.8% y-o-y in Q222, following a 6.5% print in Q122.
• On a seasonally-adjusted quarter-by-quarter basis, real GDP growth accelerated to 1.3% in Q222, from 0.6% in Q122, driven by a recovery in services. Despite this robust performance, Fitch expects growth to slow over the coming quarters amid rising economic headwinds and less favourable base effects. Consequently, it has revised down its growth forecast for 2023 from 5.2% to 2.9% due to elevated inflation, tighter financing conditions and a substantial slowdown in US growth.
• Additionally, it is expected that private consumption will add 2.5pp to growth in 2022, down from an estimated 3.2pp in 2021, as elevated inflation erodes real household disposable incomes. Inflation stood at 9.3% y-o-y in September 2022, down from a peak of 11.8% y-o-y in April but still at multi-year highs and comfortably above the Bank of Jamaica (BOJ)'s 4.0-6.0% target range.
• On the other hand, the positive follow-through effects of the recovery in tourism on jobs and incomes will prevent a sharper slowdown in household spending in H222. Indeed, consumer confidence improved slightly during Q322 according to the latest quarterly survey conducted for the Jamaican Chamber of Commerce (JCC).

(Source: Fitch Solutions)

• Mexico's economic activity indicators in the third quarter point to economic growth in line with forecasts of 2.4% annual growth in 2022. The finance ministry noted that "The Mexican economy continues to grow with solid macroeconomic balances despite a challenging international environment."
• The dynamic economic activity and a strong labour market led to "positive results" in tax collection, putting it on track to meet year-end estimates. In addition, economic activity was propelled by gross fixed investment, especially in national machinery and equipment and residential construction.
• However, consumer prices kept rising due to factors such as high raw material prices, as well as droughts and rains in various parts of the country. Nevertheless, Mexico's public debt stood at 46.5% of its gross domestic product (GDP) by the end of the quarter and was on a stable trajectory toward the end of the (current) administration.
• Refinancing strategies have managed to refinance an accumulated $78 billion, or 14% of Mexico's total debt, according to the ministry. Mexico's public debt "continued on a stable and sustainable path as a result of prudent fiscal policy and the implementation of various debt management operations," the ministry said.
• Importantly, the country's fiscal deficit stood at 111.252Bn pesos ($5.62Bn) in September relative to 99.578Bn pesos ($4.84Bn) in the same period last year. Additionally, Mexico's financial system also remained "well capitalized" and its credit market continued to show signs of recovery.

(Source: Reuters)