• Fitch Solutions expects that the Central Bank of Brazil (Banco Central do Brasil - BCB) will cut its policy rate from 10.50% to 9.50% by year-end (9.25% previously forecasted), with economic resilience and uncertainty surrounding the government’s fiscal policy stance set to see the central bank adopt a slightly less hawkish stance.
• The BCB lowered its policy rate by 25bps at its May 8 meeting, having guided back in March that it would move by 50bps. Officials signalled that they would take a meeting-by-meeting approach in the coming months.
• While the external picture has improved somewhat, BCB officials indicated in May’s policy statement that they are not comfortable remaining on autopilot in the current environment and will instead shift to a more data-dependent approach; which has been the stance for most global central banks.
• Consistent with this slightly hawkish shift, the BCB’s committee also revised its end-of-year inflation forecasts modestly from 3.5% at the time of the last meeting to 3.8% (target: 3.00%).
• Risks to Fitch’s forecasts are tilted in favour of a slower pace of loosening in the coming months. In addition to domestic economic factors (eg. the Brazilian government’s moves to use new fiscal rules this year to boost spending), a pick-up in global financial market volatility is another development that could see the BCB take a more cautious approach.

 (Source: Fitch Solutions)

• The Bank of England has sent a new signal that borrowing costs will fall earlier and further across Europe than in the United States, setting markets up for major shifts as investors play a monetary policy divide opening up across the Atlantic.
• Investors see European stocks and debt leading global markets this year as rate cuts boost spending, softer inflation burnishes bonds, and weaker currencies lift exports. Traders stepped up bets for UK easing after the BoE on Thursday held rates at 16-year highs of 5.25% but trimmed inflation forecasts, pushing sterling down and stocks higher.
• That came after Sweden cut rates for the first time since 2016, while Switzerland cut rates in March, and the European Central Bank flagged a June cut. In contrast, the U.S. Federal Reserve is set to keep rates high for longer.
• "This is the European pivot," said Florian Ielpo, head of macro at Switzerland's Lombard Odier Investment Management, who is positive on European and UK stocks. Since 2020, the United States has generated the lion's share of global equity gains.
• Paul Flood, multi-asset portfolio manager at Newton Investment Management, said he was buying UK stocks on valuation grounds and was positive on UK government bonds because there was more potential for BoE rate cuts ahead. "This is the European pivot," said Florian Ielpo, head of macro at Switzerland's Lombard Odier Investment Management, who is positive on European and UK stocks. Since 2020, the United States has generated the lion's share of global equity gains.
• European government bonds could outperform the U.S. but are likely to stay volatile as the inflation path worldwide remains unpredictable, investors and analysts said.
• The BoE, the ECB, and other European central banks might regret sounding too dovish too soon, Lombard Odier's Ielpo said. This statement suggests that central banks might face challenges due to prematurely cutting rates in terms of still unclear inflationary pressures. In the U.S., the Fed sent a strong signal in December that rate cuts were coming but then turned more hawkish after financial conditions became euphoric and inflation stalled above its target.

(Source: Reuters)

• The number of Americans filing new claims for unemployment benefits rose last week to the highest level in more than eight months, offering more evidence that the labour market was steadily cooling.
• "The labour market shows some signs of rebalancing with fewer job openings posted around the country, and now company layoffs are picking up, hinting at caution on the part of companies as they weigh the outlook for the second half of the year," said Christopher Rupkey, chief economist at FWDBONDS.
• Initial claims for state unemployment benefits increased 22,000 to a seasonally adjusted 231,000 for the week ended May 4, the highest level since the end of last August. The increase was the largest in nearly four months. Economists polled by Reuters had forecast 215,000 claims in the latest week. Claims broke above the 194,000-225,000 range, which had prevailed since the start of the year.
• Sentiment surveys, including the Institute for Supply Management and the NFIB, have been flagging a sharp slowdown in the labor market. Companies, however, appear to be cutting back on hiring, while largely holding on to their workers after struggling to find labour during and after the COVID-19 pandemic.
• The labour market is steadily rebalancing in the wake of 525 basis points worth of interest rate hikes from the U.S. central bank since March 2022 to dampen demand in the overall economy.
• The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 17,000 to a seasonally adjusted 1.785 million during the week ending April 27, the claims report showed. "This still very low level of continuing claims is further evidence that the big jump in initial claims in early May is not the start of a persistent rise in laid-off workers but bears close watching," said Stuart Hoffman, senior economic advisor at PNC Financial.

(Source: Reuters)

• In a bid to expand its global footprint, Jamaica’s Tourism Minister, Edmund Bartlett, has detailed proactive efforts to cultivate visitor arrivals from a variety of new destinations worldwide. This initiative is part of the country’s strategic approach to diversify its tourism markets and enhance its presence in untapped regions. 
• Key focus areas include India and Latin America and burgeoning segments in North America, specifically the US and Canada, where the potential for leisure and business travel is promising.
• Minister Bartlett highlighted a significant uptick in tourism from Latin America, with a 40% increase in arrivals, totaling about 36,000 visitors in 2023. This surge is attributed to strengthened partnerships and enhanced flight connectivity.
• Despite facing challenges, Jamaica remains steadfast in its commitment to capture the Asian market, particularly India. Acknowledging the high potential of the Indian travel sector, the country has engaged TRAC Representations (India) to represent its interests.
• This partnership aims to build strong relationships with local travel entities and promote Jamaica as an attractive destination for Indian tourists. The strategy leverages the popularity of West Indies cricket icon and music personality Chris Gayle to strengthen its marketing outreach.
• Jamaica’s tourism sector has demonstrated remarkable resilience and growth, surpassing previous financial forecasts. In 2023, the sector’s gross earnings reached a new high of US$4.38Bn, an almost 10% increase over the prior year. This financial success is further supported by record-breaking passenger traffic through the island’s airports, contributing substantially to national revenue.
• Looking ahead, the ministry is focused on launching more inclusive initiatives to ensure that the benefits of tourism are widely distributed among Jamaicans, not just concentrated among a privileged few.

 (Source: Caribbean National Weekly)

• The Coconut Industry Board (CIB) is looking to expand agro-processing output and value-added exports by at least five per cent annually. This is among the operational plans contained in the Jamaica Public Bodies Estimates of Revenue and Expenditure for the Year ending March 2025.
• To achieve the target, the CIB will be pursuing several activities this year to encourage efficient production and adoption of innovative technologies and provide ongoing research and support, while creating marketing opportunities for the various products that can be derived from coconut.
• In addition, two training programmes for farmers will be held with a focus on seed nut selection, which is expected to increase germination and production rates by 15 percent. The CIB also plans to set 55,000 seed nuts and distribute 19,625 seedlings to registered farmers. Other initiatives by the CIB include the development of coconut varieties that meet market demand.
• The research arm will explore the use of molecular technologies for crop improvement and the development of resilient, robust coconut hybrids, and a tissue culture project will also commence in collaboration with the Scientific Research Council (SRC).
• The CIB also plans to pursue business partnerships with industry and other investors actively, and will conduct 15 climate smart training/workshops, research the use of smart water in the Jamaican coconut sector and as well as investigate and demonstrate (test) the application of drone technology in combatting praedial larceny.
• The CIB was established under the Coconut Industry Control Act (1945) to promote interest in the local industry and encourage the efficient production of coconuts through the distribution of seedlings to registered farmers, provision of ongoing research support and the development of marketing opportunities locally and globally.

(Source: JIS)

• Fitch Solutions expects Guyana's oil-driven economic boom to continue over the coming years as the hydrocarbons sector continues to expand rapidly. 
• Against this background, Fitch has raised its forecast for real GDP growth in 2024 from 23.5% to 28.6% due to an improving near-term outlook for oil output, following the swift ramp-up of production at the country's third offshore field.
• Preliminary data from the Bank of Guyana show growth reached 33.0% in 2023, beating Fitch’s forecast of 29.5%, driven by increased oil investment and output as the country's third production vessel, the Prosperity, commenced operations at the Payara field in November 2023. 
• Against this backdrop, Fitch’s Oil & Gas team expects Guyana to increase its average crude oil output by 49.6% y-o-y in 2024, reaching 584,000 b/d (barrels per day). Oil production is forecast to more than double over the coming years to reach an average of 1,187,000 b/d in 2028 as the ExxonMobil-led consortium commences production at three more fields -Yellowtail, Urau, and Whiptail.
• While headline growth will be fuelled primarily by exports and investment in the oil and gas sector, the government will also continue to ramp up spending to stimulate growth in the non-oil economy.
• The risks to Fitch’s growth outlook hinge on development in the oil and gas sector, with key downside threats being a disruption to oil production or a pullback in foreign investment in response to any slump in global oil prices. Fitch also notes moderate risks associated with the Venezuela-Guyana border dispute, which would rise sharply if Venezuela adopts a more hostile approach ahead of presidential elections due in the second half of 2024. That being said, Fitch’s core view remains that an invasion and military conflict is unlikely. 

(Source: Fitch Solutions)

• Chile's central bank said in a report on Tuesday, May 7, that the economy is broadly recovering, though some sectors have lagged and financial market depth has not yet returned to levels seen before the coronavirus pandemic.
• The bank pointed to the South American country's commercial, construction and real estate sectors as having fallen behind, which it said had elevated the possibility of defaults. "The external scenario continues to be the main source of risks for local financial stability," according to the bank. Meanwhile, the finances of local companies and individuals had broadly improved, it said in a half-year stability report.
• The monetary authority added that in the consumer sector, while more people were failing to meet mortgage payments, this remained at a relatively low level. Household finances were overall seen stabilizing thanks to rising incomes and smaller financial burdens, according to the report.
• The document stipulated that external macroeconomic risks highlight the importance of strengthening the resilience of local agents and the domestic financial market. It also flagged risks including uncertainty regarding U.S. monetary policy and rising global debt.
• Chile's inflation rate, which hit 30-year highs in 2022, has been converging to the bank's 3% target, pushing the bank to lower its benchmark interest rate from a high of 11.25% to its current level of 6.5%.
• The report comes a day after the central bank board unanimously voted to keep capital requirements for risk assets at the same level since last May, a measure intended to boost the economy's resilience in the face of severe stress scenarios.

(Source: Reuters)

• Federal Reserve Bank of Boston President Susan Collins said on Wednesday that the U.S. economy needs to cool off as an avenue toward getting inflation back to the central bank’s 2% target. “A slowdown in activity will be needed to ensure that demand is better aligned with supply for inflation to return durably” to the official target, Collins said in remarks to be delivered at a Massachusetts Institute of Technology event.
• For now, when it comes to monetary policy, “the recent upward surprises to activity and inflation suggest the likely need to keep policy at its current level until we have greater confidence that inflation is moving sustainably toward 2%,” she said.
• The persistence of price pressures has generated considerable uncertainty over when the central bank might be able to cut interest rates. In recent appearances, many Fed officials have kept alive the prospect of an easing, but have backed off from providing any sort of period for lowering rates while they watch data for progress on lowering inflation.
• That said, getting inflation to 2% “will take more time than previously thought,” with Collins noting “There is no pre-set path for policy – it requires decisions based on a methodical, holistic assessment of wide-ranging information.”
• Collins also said in her remarks that longer-run inflation expectations have been consistent with the Fed’s 2% inflation goal, and she said that the recent jump in productivity is likely not the making of an enduring trend. Collins also said that employers are likely able to absorb higher wage demands.

(Source: Reuters)

• U.S. wholesale inventories fell in March, confirming that inventory investment was a drag on economic growth in the first quarter. The Commerce Department's Census Bureau said on Wednesday that wholesale inventories fell 0.4% as estimated last month. Stocks at wholesalers rebounded 0.2% in February.
• Economists polled by Reuters had expected that inventories, a key part of gross domestic product, would be unrevised. Inventories dropped 2.3% on a year-on-year basis in March.
• Private inventory investment cut 0.35% percentage point from GDP growth in the first quarter, the government reported last month. It was the second straight quarter that inventories were subtracted from GDP. The economy grew at a 1.6% annualized rate in the January-March quarter, the slowest pace in nearly two years.
• Wholesale motor vehicle inventories slipped 0.1%. There were decreases in wholesale stocks of metals, hardware, paper, medication as well as apparel, groceries, farm products and alcohol. But petroleum stocks increased as did those of lumber, furniture, machinery and computer equipment.
• Excluding autos, wholesale inventories fell 0.5% in March. This component goes into the calculation of GDP. Sales at wholesalers declined 1.3% in March after rising 2.0% in February. At March's sales pace, it would take wholesalers 1.35 months to clear shelves, up from 1.34 months in February.

(Source: Reuters)

• Citigroup CEO Jane Fraser said Monday that consumer behaviour has diverged as inflation for goods and services makes life harder for many Americans.
• Fraser, who leads one of the largest U.S. credit card issuers, said she is seeing a “K-shaped consumer.” That means the affluent continue to spend, while lower-income Americans have become more cautious with their consumption.
• “A lot of the growth in spending has been seen in the last few quarters with the affluent customer,” Fraser told CNBC’s Sara Eisen in an interview. She further notes, “We’re seeing a much more cautious low-income consumer,” Fraser said. “They’re feeling more of the pressure of the cost of living, which has been high and increased for them. So while there is employment for them, debt servicing levels are higher than they were before.”
• The stock market has hinged on a single question this year: When will the Federal Reserve begin to ease interest rates after a run of 11 hikes? Strong employment figures and persistent inflation in some categories have complicated the picture, pushing back expectations for when easing will begin. That means Americans must live with higher rates for credit card debt, auto loans, and mortgages for longer.
• “I think, like everyone here, we’re hoping to see the economic conditions that will allow rates to come down sooner rather than later,” Fraser said. “It’s hard to get a soft landing,” the CEO added, using a term for when higher rates reduce inflation without triggering an economic recession. “We’re hopeful, but it is always hard to get one.”

(Source: CNBC)