• The Bank of England stuck to its gradual increases in interest rates on June 15, 2022, as other Central Banks such as the US Fed, took more urgent action. It increased its Bank Rate by another 25 basis points even as it warned that Britain's economy would shrink in the April-June quarter. 
• The Monetary Policy Committee voted 6-3 for the hike to 1.25%, the same breakdown as in May with the minority voting for a 50 basis-point increase. Britain's benchmark rate is now at its highest since January 2009, when borrowing costs were slashed as the global financial crisis raged. It was the fifth time the BoE has raised rates since December when it became the first major central bank to tighten monetary policy following the COVID-19 pandemic. 
• The BoE continues to raise rates even though it has warned a sharp economic slowdown is coming, because consumer price inflation hit a 40-year high of 9% in April, more than four times the BoE's 2% target. The central bank has said that inflation would peak slightly above 11% in October when energy bills go up again. 
• Britain's inflation surge looks set to last longer than in many other economies, partly reflecting its mechanism for domestic power tariffs but also because of the hit to trade. Further, a chronic lack of workers to fill vacancies is worrying the BoE because it could lead to a jump in wages that further feeds inflation.
• A fall in the pound in recent weeks, caused largely by rising interest rate expectations elsewhere, threatens to add to inflation pressure in Britain. The BoE said the sterling had been "particularly weak against the U.S. dollar".

 (Source: Reuters)

• For the month of May, the All-Jamaica Consumer Price Index (CPI) increased by 0.3%. May’s outturn meant that the point-to-point inflation was 10.9% for the 12 months to May 2022, down from the 11.8% reported in April 2022. 
• For May, the increase in consumer prices was largely driven by the 7.7% increase in the index for the division ‘Restaurant and Accommodation Services’. Higher prices for items within the class ‘Restaurants, cafes and the like’ accounted for the increase. 
• Also contributing to the upward movement in the CPI is an increase of 0.4% in the index for the heavily weighted division ‘Food and Non-Alcoholic Beverages’. Within this division, the class ‘Cereals and cereal products’ had the largest increase (2.4%) due to increases in the price of flour, bread, and rice, as global shortages around inputs such as wheat, drove up the prices of these imported goods. 
• However, the increase in the ‘Food and Non-Alcoholic Beverages’ division was tempered by a 2.9% decline in the index for the class ‘Vegetables, tubers, plantains, cooking bananas and pulses’. This decline was due to lower prices for agricultural produce such as vegetables, as a result of an improvement in the local supplies. 
• Importantly, the overall rate of inflation was moderated by a 3.0%  decline in the index for the ‘Housing, Water, Electricity Gas and Other Fuels’ division, due largely to a decline of 9.0% in the index for the group ‘Electricity, Gas, and Other Fuels’. 
• Although the point-to-point inflation has declined by 0.9 percentage points, it remained outside the BOJ’s target range of 4% to 6%, for the 10^th consecutive month. This breach is expected to continue as the BOJ  projects successive breaches of the target over the next two years. Although the rate was expected to peak within the range of 12.0% and 15.0% by June 2022, this may occur later than expected as global challenges continue to develop. Inflation will likely remain elevated as drought and the Russian Ukraine war raises food security challenges. This is expected to drive continued transmission of higher international commodity and shipping prices to domestic processed foods, food-related services, and energy costs. 
• On June 29th the BOJ will have its monetary policy meeting and it is speculated that it will increase its policy rate once more. This increase will likely carry the policy rate to 5.5%, from the current rate of 5.0%. This decision will be driven by the expectation for future breaches in the inflation range and the still elevated inflation expectations for 12 months ahead, which rose to 12.1% in the March’s Survey from 9.1% in the prior survey. The recent increase in the Fed funds rate to the target range of 1.5% and 1.75% from 0.75% and 1.0% will also likely play a role in the BOJ’s policy rate decision.

(Sources: STATIN & NCBCM Research)

• Given ExxonMobil’s aggressive approach towards unlocking more oil in the Stabroek Block, which already holds almost 11Bn barrels of oil equivalent resources, the World Bank is now warning Guyana to be wary of the environmental and economic consequences that come with an accelerated pace of development. 
• The financial institution has been one of the nation’s key development partners since the discovery of oil back in May 2015. Over the years, it has spoken glowingly about the nation’s potential to be a state with oil and gas as well as the significant revenues that will come. 
• Of note, in an updated economic review of the nation, the World Bank said Guyana, is poised to be the fastest growing economy in the world, fuelled primarily by the expansion of oil output. Nevertheless, the World Bank was keen to note that the real challenge will be for Guyana to transform this newfound oil boom into a better standard of living for citizens. 
• It also underscored the importance of the country being cognizant of its vulnerability to oil-related shocks, both price and output, and highlighted the possibility of increased spending as the revenues pour in, which could overheat the economy. The bank cautioned that the nation must spend according to the effectiveness of its systems to monitor and control wastage and ensure efficiencies.

(Source: Kaieteur News)

• The Central Bank of Trinidad & Tobago stated that the supply-side stimulus to both food and core inflation in the twin island is anticipated to persist to the end of 2022. According to its latest Monetary Policy Report, rising fertilizer prices will lead to higher costs of imported food. 
• The war in Ukraine has disrupted the supply of agricultural factor inputs such as potash fertiliser, and any resolution to reduce fertiliser application may result in lower crop yields which can elicit export restrictions from major food-exporting nations. 
• Inflation remained relatively anchored at 4.1% in March 2022 (up from 3.9% in October 2021), but several supply-side factors such as high and rising international food prices and international transport delays had notable pass-through to domestic prices. Elevated energy and food prices and increased external demand as economies recover are expected to be the driving factor for inflation. 
• Thus far the Central Bank of Trinidad and Tobago has kept its monetary policy stance unchanged with its short-term rate on its overnight collateralised financing to commercial banks, at 3.5%. Fitch Solutions expects the bank to raise the rate moderately to 3.75% as inflation rises.

(Sources: Trinidad and Tobago Guardian & CBTT)

• The average interest rate on the most popular U.S. home loan climbed to its highest level since the 2008 financial crisis and purchase applications were down more than 15% from last year, Mortgage Bankers Association (MBA) data showed on June 15, 2022. 
• The average contract rate on a 30-year fixed-rate mortgage rose by 25 basis points to 5.65% for the week ended June 10, the highest level since late 2008, towards the end of the financial crisis and Great Recession. 
• The MBA said its Purchase Composite Index, a measure of all mortgage loan applications for the purchase of a single-family home, increased 8.1% from a week earlier and its Refinance Index rose 3.7%. This means that more homebuyers sought properties compared to a week earlier, perhaps signalling a flurry of activity before aggressive tightening by the Federal Reserve further impacts the sector.

(Source: Reuters)

• Russia’s Gazprom announced a reduction in natural gas flows through a key European pipeline for the second day in a row Wednesday, creating further energy turmoil for Europe as it tries to reduce its extensive use of Russian oil and natural gas amid the war in Ukraine. 
• The state-owned energy giant said on Twitter that deliveries through the Nord Stream 1 pipeline to Germany would be cut again Thursday, bringing the overall reduction through the undersea pipeline to 60%. 
• The drop in shipments of gas used to power industry and generate electricity would amount to some 16 billion cubic meters by the end of the year, or around 10% of total European Union gas imports from Russia, according to Simone Tagliapietra, an energy policy expert at the Bruegel think tank in Brussels. 
• In light of the unfair invasion of Russia, the sanctions and the instability of the oil market in the West, Europe is working to reduce its dependence on Russian energy as the war worsens rising oil and gas prices that are fueling record inflation. Gas demand has fallen after the end of the winter heating season, but European utilities are racing to refill storage ahead of next winter with prices high and supplies uncertain. 
• While gas storage is refilling well, the cutoffs and reductions come on top of an explosion at a liquefied natural gas terminal in Texas whose exports were largely going to Europe, adding another squeeze to the tight natural gas market, energy expert Tagliapietra said. He urged Europe “not to be complacent and urgently scale-up coordination” so the continent is “prepared for a possibly difficult winter ahead.”

(Source: AP News)

• JFP Limited’s (JFP) net profit to rose more than three folds to $34.91Mn for the three months ended March 31, 2022. 
• This performance was driven by a 70% increase in revenues and a 8% decline in direct costs due to the increased efficiency of its operations. Revenues rose as customers brought capital projects back on stream. This resulted in gross profit increasing by 168% and its margin rising from 17% in 2021 to 33% in 2022. 
• Administrative expenses increased by 46.4% over the period mainly due to transaction costs related to the initial public offering and fees associated with the change of the name to JFP Limited. Despite higher administrative expenses, operating profit increased by 237%. 
• As the country continues to rebound on the back of the relaxation of restrictions by the government, JFP expects the strong performance in Q1 to continue in the coming quarters, especially as it considers the confirmed jobs in hand. It also has plans to take advantage of opportunities in the international market, whilst still paying keen attention to the domestic market. With these factors supporting the outlook for profitability, management expects to see an outturn reflective of its best year in its 37 year history. 
• JFP’s stock price has increased by 41% since listing in February 2022. The stock closed Wednesday’s trading session at $1.41 and currently trades at a P/E of 34.9x, which is above the Junior Market Manufacturing Sector Average of 20.0x. JFP’s high P/E relative to the sector suggest that the expected growth in earnings may already be reflected in the stock price.

(Sources: JSE and NCBCM Research)

• CAC 2000 Limited (CAC) reported a 58.6% improvement in net profit to $13.80Mn for its six months ended April 30, 2022. 
• As most companies started their return to regular working days, along with the cessation of lockdowns, there was increased demand for CAC’s services, which resulted in a  5.3% increase in revenue. This along with a 0.6% decline in direct costs influenced a 13.9% increase in gross profit and 3.3 percentage points rise in the gross margin. 
• While operating expenses increased by 11.5%, the operating profit margin increased from 3.4% in 2021 to 4.8% in 2022 as revenue growth outpaced the rise in expenses. 
• Although supply chain issues will continue to present a challenge for the company through delays and price increases, it is anticipated that it will continue to benefit from the reopening with the resumption of many of its projects and service sites, and the resulting ability to book invoices for services etc. 
• CAC’s stock price has increased by 7.6% since the start of the calendar year. The stock closed Wednesday’s trading session at $7.75 and currently trades at a P/E of 22.1x which is below the Junior Market Distribution Sector Average of 23.2x.

(Sources: JSE and NCBCM Research)

• Dominican Republic will be one of the few economies in Latin America that will experience growth this and next year. This statement was made by the Central Bank of the DR (BCRD) and supported by the World Bank, as it forecasts 5.0% growth for the country, while reducing forecasts for almost two dozen countries in its recent “World Economic Outlook”. 
• The International Monetary Fund (IMF) and the international risk rating agency Moody’s have co-signed the excellent performance of DomRep, reaffirming that the country’s prospects remain favourable with a similar GDP growth projection of around 5.0%. 
• According to the BCRD, the economy achieved a growth of 5.8% in January-April 2022, and registered an increase of 4.7% in April alone. Growth in the first quarter of the year was 6.1% owing to the recovery of the hotels, bars, and restaurants sector. 
• However, the World Bank warns that “an aggravating factor of the damage caused by the COVID-19 pandemic, and the Russian invasion of Ukraine have exacerbated the slowdown in the world economy, which is entering what could become a prolonged period of low growth and high inflation.” 
• Notably, the danger of the economic situation that has prevented many countries from growing is that it increases the risk of stagflation (a period of high inflation combined with economic stagnation) with potentially damaging consequences for both middle-income and low-income economies. 
• The Central Bank has preventively raised its monetary policy rate by 350 points, from 3.00 in December 2021 to 6.50 points in June 2022, to counteract domestic inflation. However, it is taking care not to cause an abrupt drop in economic activity and employment due to higher borrowing costs.

(Source: Dominican Today)

• The World Bank’s Board of Executive Directors has approved approximately US$44Mn for Guyana’s Strengthening Human Capital through Education Project. 
• The project will focus on expanding access to quality education at the secondary level, as well as improving technical and vocational training (TVET) to meet the needs of the labour market. The funding aims to prepare Guyanese citizens to excel in emerging sectors of the economy including climate-resilient agriculture, low-carbon technology, and digital development. 
• “Guyana is investing heavily in its citizens, with education and vocational training playing a key role as the country is at a key juncture of its growth,” said Diletta Doretti, World Bank Resident Representative for Guyana and Suriname. This project complements other education initiatives that the World Bank is supporting, as the government is working to ensure that more people can acquire the needed skills to benefit from the ongoing economic transformation.

(Source: Kaieteur News)