• The Federal Reserve raised its target interest rate by 75 basis points, and projected a slowing economy on June 15. The Fed funds target rate range now lies in the range 1.5% and 1.75%. 
• Whereas in March the Fed expected the federal funds target rate to end this year at 1.9%, it now expects the funds rate at 3.4%, near the point St. Louis Fed leader James Bullard, one of the Fed's biggest hawks, has long been calling for. 
• It sees modest action next year that will lift the funds rate to 3.8% from March forecast of 2.8%, and an easing in monetary policy in 2024, to 3.4%, from its March estimate of 2.8%. The Fed sees the longer-run federal funds rate steady at 2.5%. 
• The shift in the Fed's rate projections outlook suggests officials now believe they can get inflation back under control with a front loaded rate rise campaign, and their inflation forecasts holds for a big moderation in price pressure by next year. That said, the story of the Fed for some time has been one of it blowing its inflation forecasts and getting surprised by the persistence of price pressure gains.

(Source: Wall Street Journal)

• The U.S. Department of Energy on Tuesday (June 14) said it was selling up to 45Mn barrels of oil from the Strategic Petroleum Reserve as part of the Biden administration's previously announced, largest-ever release from the stockpile. 
• Deliveries of crude from the SPR sale would take place from Aug. 16 through Sept. 30. The Biden administration said in late March it would release a record 1Mn barrels of oil per day for six months from the SPR. 
• The release was meant to help control oil prices that spiked after Russia, one of the world's top petroleum producers, invaded Ukraine and as the West imposes sanctions on Moscow. Prices for global benchmark Brent crude have marched higher since the March 31 announcement to trade above $120 a barrel. The rise has come as few global oil producers have spare capacity ,while consumers emerging from the pandemic are driving fuel demand. 
• Biden administration officials have said the oil price could be higher if the SPR had not been tapped. But the release has also driven the level of the reserve to the lowest point since 1987, adding to worries about tight global oil markets, despite the United States having more in the stockpile than required under international agreements.

(Source: Reuters)

• The Ministry of Tourism is looking to tap into the local labour force to identify, recruit and deploy at least 10,000 of the 90,000 workers required in the global cruise industry. Portfolio Minister, Hon. Edmund Bartlett, says the demand stems from a shortage of workers occasioned by the COVID-19 pandemic’s disruption of tourism activities worldwide, which resulted in a reduction in the number of persons employed in the sector. 
• The demand for employees within the tourism industry is consistent with those in various domestic and global sectors and forms part of the response in the overall post-COVID-19 recovery efforts. 
• The labour demand in the tourism, as well as growing Business Processing and Outsourcing (BPO) sectors should fuel employment in 2022. Overall the unemployment rate which has been trending downwards since July 2020, could fall lower than the 6.2% recorded in January 2022-- the lowest in over 10 years. 
• However, there are downside risks as increased costs to businesses due to the high inflationary environment may result in some businesses reducing their wage bill to stay profitable.

(Source: JIS and NCBCM Research)

• The Bahamas is “still among the leaders” despite a 60% year-over-year decline in foreign direct investments in 2021 to US$360Mn from US$897Mn in 2020. This was the lowest figure in the last five years, falling well below the $901Mn and $947Mn FDI inflows attracted in 2017 and 2018, respectively, as well as the $611Mn received in 2019. 
• Hubert Edwards, the head of the Organisation for Responsible Governance’s (ORG) economic development committee, stated that while the World Investment Report had disclosed a “dramatic” and “large drop-off” in a key Bahamian economic driver there should be no cause for immediate alarm given the economic effects of the pandemic. 
• Many major investment decisions were placed on hold due to the uncertainty associated with the COVID-19 pandemic. Despite this, The Bahamas remained the third most-popular foreign direct investment (FDI) destination among small island developing states (SIDS) globally - and the leader in the Caribbean – which underlines the attractiveness of this jurisdiction for global capital. 
• Furthermore, although 2021’s $360Mn inflow was the lowest in five years, Mr. Edwards voiced optimism that The Bahamas will soon see a rebound in FDI inflows as economic activity recovers globally and locally.

 (Source: The Tribune & NCBCM Research)

• Moderating revenue growth and a jump in expenditures will widen the Dominican Republic’s fiscal deficit to 3.1% of GDP in 2022, from 3.0% in 2021, as the government raises social assistance and subsidy spending in response to elevated inflation. 
• Revenue growth will moderate to 10.8% in 2022, from 33.0% in 2021, as base effects fade and economic growth return closer to pre-pandemic levels. In Q1 2022, revenue growth reached 21.9% y-o-y as tourist arrivals by air grew 239.2% y-o-y (91.4% of Q1 2019 arrivals), highlighting the robust recovery in the tourism industry. However, tourism growth will moderate in the quarters ahead as economic headwinds in tourist source markets like the US and Canada increase, reducing tourism demand. 
• Persistently high food and fuel prices will lead the government to maintain generous social and subsidy spending initiatives in the months ahead, outweighing the impact of solid revenue growth and widening the deficit. 
• Total expenditures are expected to grow 11.8% in 2022, from 0.3% in 2021, as the government boosts social spending to mitigate the effects of elevated inflation on households and allocates more funding to capital expenditures.

(Source: Fitch Solutions)

• One of the closely watched parts of the U.S. Treasury yield curve inverted on Monday for the first time since April following hotter-than-anticipated inflation data last week. As the U.S. Federal Reserve attempts to bring inflation down from 40-year highs, banks have ramped up projections of interest rate hikes, and some shorter-dated bond yields surged higher than longer-term ones. 
• The yield curve, which plots the return on all Treasury securities, typically slopes upward as the payout increases with the duration. Yields move inversely to prices. A steepening curve typically signals expectations for stronger economic activity, higher inflation, and higher interest rates. A flattening curve can mean investors expect near-term rate hikes and are pessimistic about economic growth. An inversion, however, signals that a recession could follow. 
• The 2/10 part inverted, meaning the two-year Treasuries yielded more than the 10-year paper. Short-term yields, which are sensitive to interest rates, are rising with rate-hike expectations while higher long-term rates reflect concerns that the Fed will be unable to control inflation. 
• That part of the curve had inverted in late March for the first time since 2019. It steepened again as traders, having priced in a string of rate hikes, sharpened their focus on the pace and scope of the Fed's plans to reduce its balance sheet. 
• While rate increases can be a weapon against inflation, they can also slow economic growth by raising borrowing costs. When short-term rates increase, U.S. banks tend to raise benchmark rates for a wide range of consumer and commercial loans, including small business loans and credit cards, making borrowing more costly for consumers. Mortgage rates also rise.

(Source: Reuters)

• U.S. producer prices increased solidly in May as the cost of gasoline surged, another sign of stubbornly high inflation that could force the Federal Reserve to raise interest rates as much as 75 basis points on June 15. This follows news last week that consumer prices accelerated in May (8.6%), culminating in the largest year-on-year increase since 1981. 
• The producer price index for final demand rose 0.8% last month after advancing 0.4% in April. A 1.4% jump in the prices of goods accounted for nearly two-thirds of the rise in the PPI. 
• Goods prices, which rose 1.3% in April, were driven by soaring costs for energy products. Wholesale gasoline prices rebounded 8.4% after falling 3.0% in April, making up 40% of the rise in the costs of goods. Jet fuel increased 12% after shooting up 14.8% in April. There were also increases in the cost of residential natural gas, steel mill products and diesel fuel. 
• As producer price increases continue to shoot higher, this could mean even more pipeline pressures for the consumer in the months to come.

(Source: Reuters)

• Scotia Group reported a net profit of $4.37Bn for its six months ending April 30, 2022 which represents a year-over-year decline of 2.5%. This was influenced by lower revenues as operating expenses remained flat. 
• Although net interest income increased 16% due to a rise in interest earned on the investment portfolio and improved retail loan volumes, revenues declined 1.6%. The decline was attributed a fall in gains on financial assets (-83.9%), other revenue (-69.4%) and net gains on foreign currency activities (-26.1%). 
• To improve its financial performance Scotia has implemented new initiatives such as  lowering the minimum opening balance requirement for mutual funds and unit trusts to $250,000. This move will allow more of its customers to add investment products to their overall financial portfolio. Additionally, its insurance arm—Scotia Insurance—launched Scotia Elevate, a new Universal Life product, which requires no medical underwriting.  These new initiatives should support its top-line performance in the coming months. 
• Scotia’s stock price has appreciated by 2.6% year-to-date to $36.95. At its present price it trades at a P/E of 13.9x, which is above the Main Market Financial Sector Average of 12.1x .

(Source: Company Financials & NCBCM Research)

• The World Bank projected a slowdown in growth in the Caribbean, as it delivered a grim warning that many of the world’s countries face recession. The financial institution’s Global Economic Prospect report said the world economy was now headed toward “a protracted period of feeble growth and elevated inflation”. 
• The World Bank is projecting 2.9% global growth this year, down from 5.7% in 2021, and credits the expected lack lustre performance to Russia’s invasion of Ukraine and the effects on key commodities, coupled with the fallout from the COVID-19 pandemic. 
• According to the Bank, the unstable conditions have severely hit Latin America and the Caribbean (LAC) economies and expected economic growth in the region will slow to 2.5% this year and further to 1.9% in 2023. Growth in the Caribbean is however projected at 6.9% in 2022 and 6.5% in 2023, helped by recovering tourism. 
• Notably, the region’s growth forecast includes spillovers from weaker global growth, increased food insecurity and social unrest, continued higher-than-forecast inflation and financial stress. In addition, the war in Ukraine is having substantial effects on the region via higher commodity prices and weaker global growth. 
• Further, in a context of slow growth and rising US interest rates, financial stress could take hold in some economies of the region, especially if policymakers are unable to credibly commit to reforms to sustainably boost growth. To reduce the risks, the World Bank said policymakers should work to coordinate aid for Ukraine, boost the production of food and energy, and avoid export and import restrictions that could lead to further spikes in oil and food prices.

(Source: Barbados Today)

• Peru's central bank raised the country's benchmark interest rate by 50 basis points to 5.5% on June 9, the eleventh consecutive hike, as authorities in the copper-producing Andean nation battle stubbornly high inflation. Peru's central bank has raised the key interest rate 525 basis points since mid-2021. Prices rose more slowly in May than in the two prior months, but annual inflation still reached 8.09%, its highest level in 24 years. 
• The Andean nation’s central bank’s decision follows rate hikes this week in Brazil, Chile, and Mexico, as authorities respond to inflation that is not falling as quickly as expected.

(Source: Reuters)