• On May 13, policymakers at the Banco de México (Banxico) held the benchmark interest rate at 4.00%. This was the second consecutive hold for Banxico after a 425 basis point (bps) cutting cycle that began in August 2019 and accelerated in H1 2020 as the Covid-19 pandemic arrived.
• While Banxico expects higher inflation will be transitory as it reflects strong base effects and temporary goods shortages from logistical bottlenecks, Fitch Solutions believes that upside risks to price growth contrasted against a still-recovering economy suggest that the bank has limited room for maneuver in either direction.
• In addition, the agency sees a risk of increased financial market instability due to rising US bond yields and Mexico’s mid-term elections on June 6, which will further encourage Banxico to maintain its current stance. The bank’s statement reflected these pressures, striking a more cautious tone.
• That being said, Fitch Solutions maintains its view that Banxico will hold its benchmark rate at 4.00% through the end-2021 to support economic activity and investment before raising rates in 2022 by 25bps.
• The agency expects the bank will be cautious about raising borrowing costs amid the country’s economic recovery, particularly as the government has enacted minimal fiscal stimulus and an accommodative US Federal Reserve will ease upside pressure on Mexican interest rates in the near term.

(Source: Fitch Solutions)

• Brazil’s real will strengthen and the economy will beat expectations this year as privatizations, investment and structural reforms turn a cyclical rebound into a sustained recovery, according to Economy Minister Paulo Guedes.
• A long-delayed tax bill is making progress in the legislature while resistance to a planned overhaul of public sector careers is falling, the minister told Bloomberg News on Thursday, forecasting both proposals to be approved this year. While the first reform is designed to improve Brazil’s business environment, the second intends to reduce the costs of public servants over time.
• “As reforms make progress, everybody will see that the currency is mispriced, that it will strengthen,” Guedes said during a two-hour interview at his office in Brasilia. “The currency had an overshooting and is now finding its equilibrium.”
• The Brazilian currency lost about a quarter of its value in 2020 amid investor concerns about excessive public spending during the pandemic. A recent surge in commodity prices, coupled with aggressive interest rate hikes by the central bank and an improved fiscal outlook have helped to shore up the real in the past few weeks. It is now up about 5.8% since the end of March, the world’s best performing major currency.

(Source: Bloomberg)

• The Federal Reserve needs "several more months of data" to ensure recent weak job growth and high inflation are temporary before considering changes to its ultra-easy monetary policy, Fed Governor Christopher Waller said on Thursday.
• Waller said a "ready-to-rip" economy will eventually work through what he regards as a temporary mismatch between companies' booming demand for workers and the willingness of people on the sidelines of the labor market to take jobs while the coronavirus pandemic is continuing and unemployment benefits are available to pay the bills.
• A higher-than-expected 4.2% jump in consumer prices in the 12 months through April, meanwhile, will prove temporary as supply bottlenecks ease, and consumers spend down a surplus of savings accumulated from the flow of government aid during the pandemic, Waller said at a Global Interdependence Center forum.
• Despite the economic recovery, the country only added 266,000 jobs last month, about a quarter of the gain expected by economists in a Reuters poll. The April inflation and job results were a surprise that led to "the jaw of every forecaster hitting the floor," Waller said and confirmed the need for the U.S. central bank to tie policy changes to outcomes, rather than forecasts that might be off base, particularly coming out of a pandemic.
• Waller said he expects inflation to be above the Fed's 2% target, likely between 2.25% and 2.5%, for the next two years. He said that outcome would be in line with the central bank's effort to allow a period of higher inflation to make up for recent years in which the pace of price increases has lagged.

(Source: Reuters)

• If the buoyant Canadian dollar continues to rise it could create headwinds for exports and business investment as well as affecting monetary policy, Bank of Canada Governor Tiff Macklem said on Thursday.
• The currency has jumped about 4% since the central bank updated its projections in April, driven by surging commodity prices. Canada is a major exporter of energy, lumber, minerals, and agricultural products. The C$ hit a six-year high on Wednesday.
• "We've highlighted that a stronger dollar does create some risk," Macklem told reporters after a speech to university students in his most detailed comments yet about the potential drawbacks of a more muscular currency. "If it moves a lot further, that could have a material impact on our outlook and it is something we have to take into account in our setting of monetary policy."
• Further gains could drag down export projections. "If we're less competitive, our export profile is weaker, that also probably means that our investment profile will be weaker," he said. The Canadian dollar was trading 0.4% lower at 1.2180 to the greenback, or 82.10 U.S. cents, pressured by a sharp decline in oil prices.

(Source: Reuters)

• For the first quarter ending March 2021, Sagicor Group Jamaica reported $2.91Bn (EPS: $0.75) in net profit attributable to shareholders,  a 54.5% over Q1 2020 when the Group took a hit from the impact of the COVID-19 pandemic on asset prices and its operations.
• The outturn reflects a 3.9% (or $151.68Mn) increase in profit before associates and joint ventures and the absence of impairment charges on investment in associates and goodwill and loss from associates that was registered in the same period last year.
• Last year Sagicor incurred significant impairment charges of over $1.00Bn on goodwill and investment in associate. With the disposal of its holdings in its associate (Playa), it did not have to contend with these charges in 2021.
• The increase in profit before associates and joint ventures was primarily due to a 37.7% increase in total revenues aided by realized and unrealized capital gains of $1.20Bn, relative to losses of -$5.06Bn incurred in the prior year during the COVID-19 induced sell-off that weighed heavily on asset prices. However, this was largely offset by a $6.17Bn increase in total benefits and expenses to $19.07Bn.
• Economic conditions in its operating environment have begun to improve, albeit slowly and with a lot of uncertainty as the pandemic persists. However, the anticipated recovery augurs well for an improvement in revenues, lower credit losses, and the performance of joint ventures and associates.
• Since the start of the year, Sagicor’s stock price has depreciated by 1.1% and currently trades at $49.11 per share implying a P/E multiple of 12.9x earnings. This is below the main market financial sector average of 19.3x earnings.

(Source: Sagicor Financials)

• Minister of Housing, Urban Renewal, Environment and Climate Change, Hon. Pearnel Charles Jr., has hailed the construction industry for being a pillar in Jamaica during the last 12 months. While countries in the world continue to experience downturns with some of their sectors during the COVID-19 pandemic, the construction sector in Jamaica has remained resilient.
• During his contribution to the 2021/22 Sectoral Debate in the House on Tuesday (May 4), Mr.  Charles Jr. said the Jamaica Mortgage Bank (JMB) and the Housing Agency of Jamaica Limited (HAJ) have contributed significantly to this success.
• The JMB is driven to mobilize financial resources for on-lending to private and public-sector developers and financial institutions. It is also tasked with developing an active secondary mortgage market and providing mortgage indemnity insurance in support of the national settlement goal.
• In the 2020/2021 financial year, the JMB surpassed its budgeted pre-tax profits by 11.0%. This was due to the Bank’s balance sheet remaining strong and boasting year-on-year growth in its construction loan portfolio of more than 50.0%.
• With regard to the HAJ, it has accomplished a number of successful projects through joint venture agreements with private partners. 
• Both JMB and HAJ will continue to be instrumental in driving construction activity by supporting the development of residential and commercial buildings/projects.

(Source: JIS News)

• Fitch Solutions maintained its Panamanian growth forecast of 12.2% in 2021, as looser economic restrictions support a rebound in economic activity.
• The agency expects base effects will drive the rebound after a 17.9% contraction amid extensive restrictions on economic activities in 2020, though it also expects significant mining sector growth as major projects ramp up production.
• Growth should strengthen in the coming months as the slower spread of COVID-19, looser restrictions, and improving business confidence boost activity. In particular, the sectors most impacted by the initial lockdown in Q2 2020 and Q3 2020 will post sharp rebounds in economic activity. Manufacturing and commercial activity contracted over 35.0% in Q2 2020 and Q3 2020, and construction fell 79.6% y-o-y.
• Vaccine distribution will also aid in economic normalization. Through May 5, Panama had administered 16.4 doses per 100 people, the second-highest rate in Central America.
• That being said, the economy is not expected to recover to pre-pandemic levels until 2023 amid weak household incomes and high unemployment. Despite the 12.2% y-o-y real GDP growth, Fitch Solutions forecasts the economy will remain 7.9% below 2019 levels in 2021, restricting household incomes and consumption. In February, economic activity grew 3.6% m-o-m, but remained 9.7% lower in annual terms, indicating the limitations of gradual increases in demand.
• Public spending will also provide limited support to aggregate demand as the government looks to rein in its elevated deficit. Panama’s fiscal deficit is forecasted to measure 8.0% of GDP in 2021 as economic activity and revenues lag behind their pre-COVID-19 levels.

(Source: Fitch Solutions)

• The April volcanic eruptions will set back the economy of St. Vincent and the Grenadines by years because it has wiped out much of its agricultural production and the tourism sector continues to struggle due to COVID-19.
• Fitch Solutions estimates real GDP will contract 20.4% in 2021, with risks to the downside given significant data uncertainty.
• Rebuilding is likely to take years given the government's strained finances and significant demands on global donors.

(Source: Fitch Solutions)

• U.S inflation expectations have surged to the highest in a decade as the economy reopens from COVID-19-related shutdowns, putting investors at odds with the Federal Reserve, which sees price pressures still far from its target.
• Inflation expectations as measured by breakevens on Treasury Inflation-Protected Securities (TIPS) over the coming five years jumped to a 10-year high of 2.73% on Monday.
• The jump comes at the same time that Fed policymakers talk down inflation expectations, saying near-term inflation will be transitory and that there are challenges in reaching their average target of 2% on an ongoing basis.
• Prices of commodities, houses and other goods and services are jumping as the government increases fiscal spending while the Fed also maintains low rates and unprecedented bond purchases. As the economy reopens, investors are also pondering whether the Fed will be too slow in reacting to price increases, or if the market has gotten ahead of itself in pricing them in.

(Source: Reuters)

• Renewable power generation grew at the fastest rate in two decades last year, and that growth is set to continue in the aftermath of the pandemic, according to a new report from the International Energy Agency.
• IEA said policy decisions in China and the U.S., among other things, fueled the growth, counteracting the impact of supply chain disruptions from the coronavirus.
• Renewable electricity added last year jumped 45% to 280 gigawatts (GW), marking the largest year-over-year increase since 1999.
• The Paris-based agency envisions this rate of growth becoming the “new normal.” IEA sees 270 GW added in 2021, followed by 280 GW in 2022. These estimates are 25% higher than the agency’s prior forecasts established last November.
• “Wind and solar power are giving us more reasons to be optimistic about our climate goals as they break record after record,” said Fatih Birol, IEA’s executive director. “Last year, the increase in renewable capacity accounted for 90% of the entire global power sector’s expansion.
• In its annual World Energy Outlook report released in November, IEA said solar is poised to become the new king of electricity as falling prices make solar cheaper than new coal and gas-fired plants.

(Source: CNBC News)