• The Bank of Canada on Wednesday held its key overnight interest rate unchanged, as expected, and said inflation was broadening even as it warned that the Omicron coronavirus variant has created "renewed uncertainty." 
• The Central Bank, in a regular rate decision, left its key overnight interest rate at 0.25% and maintained guidance that economic slack would be absorbed in the "middle quarters" of 2022, setting the stage for the first rate hike as soon as April. 
• But it dropped a reference to the pressures pushing up prices as being "temporary," while noting employment had returned to pre-pandemic levels, with job vacancies high and wage growth picking up. 
• "Inflation is elevated and the impact of global supply constraints is feeding through to a broader range of goods prices," the Bank of Canada said.

(Source: Reuters)

• The Bank of England faces a fresh decision next week on whether to become the first of the world's major central banks to raise interest rates since the onset of the coronavirus pandemic.
• The BoE shocked financial markets on Nov. 4 when its policymakers voted 7-2 to keep Bank Rate at 0.1%, even as it said inflation was heading towards 5%. 
• Many investors had read previous comments by Governor Andrew Bailey as meaning a November rate hike was extremely likely. Since then, data has suggested the labour market withstood the end of the Government's furlough scheme - something the BoE wanted to see before any rate hike - and inflation hit a 10-year high of 4.2% in October. 
• But the emergence of the Omicron coronavirus variant has prompted some MPC officials to sound a new note of caution about the economy's recovery, although Omicron could also add to inflation pressures by aggravating supply chain problems.

(Source: Reuters)

• The National Housing Trust (NHT) is slated to spend a record $57.7Bn to provide housing solutions this year. NHT Board Member, Nesta-Claire Hunter, said that the sum is the largest programmed expenditure in the entity’s 45-year history. It will mean construction of quality and affordable housing solutions at an even faster pace, with the possibility of even more Jamaicans being able to experience the joys of homeownership. 
• Hunter also advised that the NHT has surpassed the minimum 23,000 housing starts that were targeted for delivery by March 2021. This year, NHT expects a further 8,500 housing solutions, and for the parish of St. Catherine, the second largest parish, there is another upcoming 3,984 housing solutions scheduled over the next three years. 
• In addition to supporting the Jamaicans through modern, suitable, safe and functional buildings, these housing initiatives will help support economic recovery through the contribution it will make to the construction sector. Further, increased construction activity will help to bolster the revenue and bottom line of construction companies such as Caribbean Cement Company Ltd.

(Source: JIS News & NCBCM Research)

• For the first time, Jamaica’s household helpers and fisher folk will be able to secure pension benefits under the National Insurance Scheme (NIS) as the Government moves to formalize these sectors. This will be facilitated under the Transition to Formality Action Plan, which will provide them with access to health and life insurance, pension and other facilities to offer security and protection in their work environment. 
• This follows the growing trend in many developing countries of workers being employed in industries that are unregistered or do not comply with the minimum standards of labour legislation or in some cases Decent Work. The International Labour Organization’s (ILO) defines Decent Work as productive work for women and men in conditions of freedom, equity, security and human dignity. 
• Jamaica’s national action plan, which is a tripartite collaboration among the Ministry of Labour and Social Security, the Jamaica Confederation of Trade Unions (JCTU) and the Jamaica Employers’ Federation (JEF), seeks to encourage micro, small and medium-sized, as well as large entities to embrace systems that make the process of transitioning to formality seamless. 
• The project’s development goals are to reduce the informality in work and workers engaged in the domestic, agricultural and fishing industries in the first instance. It also seeks to increase the formalization of agricultural and fishing business units and increase the institutional capacity of employers and organizations representing these industries. 
• This process will prove beneficial to workers’ as they will now have a retirement benefit. It should also improve the overall attractiveness for jobs, and potentially increase the supply of labour. An increase in persons seeking jobs could improve private consumption, and in the long run, allow them to maintain a better standard of living after retirement.

(Source: JIS & NCBCM Research)

• Despite concerns coming out about the new Omicron variant of COVID-19 and worldwide inflation, the Central Bank of Trinidad and Tobago expressed a cautiously optimistic outlook for TT in its monetary policy report for November, issued on Friday. 
• It held its repo rate at 3.5%, where it has been since 2020. In the report, the Central Bank noted that inflation stood at 2.4% in September and excess reserves averaged at about US$7.7Bn in October. It added that natural gas production fell 22.1% in the second quarter of 2021, as compared to the same period last year. 
• The report said the global economy went into recovery mode in the first half of the year, but that recovery has been uneven across countries. The US, China and Europe are now leading the charge in economic recovery. Global crude oil, which suffered from uncertainty and volatility last year, managed to stay afloat between June and October 2021 because of increased demand and a tightened supply over those months. 
• The Omicron variant raised uncertainty in global markets, but despite volatility in the international financial markets, there was still a consensus that the global economy could have better resilience to new variants, especially with vaccinations being administered worldwide.

(Source: Trinidad and Tobago Newsday)

• The Government of Barbados continues to meet all the targets and benchmarks set under the Barbados Economic Recovery and Transformation (BERT) Plan, but the IMF Monitoring Committee has warned that it may not continue unless measures are implemented to effectively manage the COVID-19 pandemic, which has put a damper on the economy. 
• For the period ending September 30, 2021, fiscal and monetary targets were met, including the ceiling on public debt, the floor on net international reserves, the floor on social spending and ceiling on public institution arrears. The structural benchmarks required to be achieved under the EFF by the end of September were also met. 
• “Despite the impact of the COVID-19 pandemic combined with the volcanic ashfall and Hurricane Elsa, the Government of Barbados has continued to achieve all of its performance targets and, in particular, the primary balance of zero percent of GDP and the growth in Net International Reserves to levels well above the programme target,” according to the IMF report.

(Source: Barbados Today )

• With the Federal Reserve likely to accelerate the removal of its unprecedented stimulus, some short-term rates have moved higher and offered money fund managers rare opportunities to generate yield. 
• With few high-quality investments available, money funds are taking advantage of the higher yields on some assets such as commercial paper. 
• For example, the three-month commercial paper rates that financial companies use to fund short-term cash flows, have jumped to 17 basis points, from 11 basis points a month ago. The three-month Libor rate, a market benchmark that is being phased out, has increased to 20 basis points, from 13 basis points in late October, and yields on one-year Treasuries have hit one-and-a-half-year highs, even as shorter-dated yields remain relatively moribund. 
• Tighter funding conditions as banks and investors pare back risk taking for year-end has sent yields of some short-dated assets higher, though in large part the rates have increased as investors price in the likelihood that the Fed will speed up the reduction of its bond purchases and that rate hikes may begin in mid-2022.

(Source: Reuters)

• Household consumption was the main driver of euro zone economic growth in the third quarter, the European Union's statistics office data showed on Tuesday, with a further positive contribution from trade. 
• Eurostat confirmed the euro zone economy expanded 2.2% quarter-on-quarter in the July-September period for a 3.9% year-on-year rise as the economy continued to recover from the deep pandemic-induced recession in 2020. 
• Household consumption contributed 2.1 percentage points to the quarterly growth number with net trade adding another 0.3 points. 
• But government spending added only 0.1 point to the final result and despite the first payouts from the EU's recovery fund for green and digital investment, gross fixed capital formation fell sharply, subtracting 0.2 points from the final figure.

(Source: Reuters)

• The Bank of Jamaica (BoJ) is expected to hike its benchmark interest rate by 75 basis points (bps) to 2.75% by end-2022, as inflation will remain above the BoJ’s target inflation range of 4.0% to 6.0% over the coming months. The bank hiked its policy rate by 50 bps, to 2.00%, in its November meeting, in line with Fitch Solutions’ forecast of a 2.00% policy rate by the end of this year. The BoJ stated that the decision was made primarily to combat rising inflation, which reached 8.5% y-o-y in October. 
• It is expected that relatively elevated prices of agricultural goods and oil will drive average inflation to 5.6% in 2021 and 6.3% in 2022. 
• Although it is expected that prices for agricultural goods will reduce in the coming quarters as the short term shock to agricultural supplies caused by tropical storms Grace and Ida in August subsides, elevated transportation and shipping costs, coupled with supply chain bottlenecks, will continue to fuel inflation through 2022. Inflation expectations are also rising. The BoJ’s October Inflation Expectation Survey shows domestic businesses also expect elevated prices, projecting an 8.2% rise in inflation in the next 12 months, compared to 7.4% in the September 2021 survey. 
• Persistently above-expectation inflation could convince the central bank to increase rates more aggressively in 2022 than currently anticipated. In its public statement following the September 2021 meeting, the BoJ noted that inflation breached its inflation target earlier than expected. Should inflation continue surprising to the upside in the coming months, Fitch would expect the BoJ to respond with a more aggressive set of interest rate hikes than currently forecasted.
• That said, the emergence of the Omicron variant could threaten Jamaica’s economic recovery and pose a downside risk to monetary forecasts. Jamaica’s vaccination rate remains low, with just 23% of the population having received at least one dose as of December 5, while the new Omicron variant is driving rising caseloads elsewhere in the world. Should cases rise in Jamaica, it could lead to the re-imposition of public health restrictions, which could undermine the economic recovery, but stymie inflationary pressures reducing the need for aggressive rate hikes.

(Source: Fitch Solutions)

• Petroleos Mexicanos, the world’s most indebted oil company, will get a $3.5Bn cash injection from the government as President Andres Manuel Lopez Obrador orders a new business plan for the struggling company. 
• The state-owned producer will use the funds to pay down obligations and also embark on a series of bond buybacks and new issuance to reduce the cost to service its debt. As part of the initiative, Pemex will also overhaul its five-year business plan, according to a statement released by the company on Monday. 
• Lopez Obrador provided a huge chunk of the federal budget to the country, after more than a decade of declines in output and limited investment in new fields. While the announcement appeared to provide some short-term support for the embattled company, analysts are skeptical that it will be enough to revive operations. 
• “It seems to be a continuation of what they have been doing: a direct transfer from the Mexican government, and trying to change the debt from the short and medium to the longer term,” said Alejandra Leon, Latin America upstream director at IHS Markit. “The critical part is whether there are changes in the operation that generate sufficient resources to deal with the debt, and that’s still unknown.” 
• Still investors seemed to be encouraged, with Pemex’s benchmark bonds due in 2031 rising 1.2 cent to 96.5 cents on the dollar, reducing its yield to 6.4%.

(Source: Bloomberg)