• The European Central Bank (ECB) held interest rates at a record-high 4% on Thursday and reaffirmed its commitment to fighting inflation, even as the time to start easing borrowing costs approaches.
• The ECB ended its fastest-ever cycle of rate hikes in September and it has been adamant, including on Thursday, that it is too soon to discuss a reversal since price pressures have not been fully extinguished and many wage negotiations have yet to conclude.
• "The consensus around the table was that it was premature to discuss rate cuts," ECB President Christine Lagarde told her regular news conference following the decision, insisting that future decisions would depend on incoming data. "We need to be further along the disinflation process to be confident that inflation will be at target - sustainably so."
• Policymakers speaking on condition of anonymity after the meeting said they were open to a change in rhetoric at their next meeting, paving the way for an interest rate cut possibly in June, if upcoming data confirms inflation has been vanquished.
• Notably, in a possible sign that the tone was starting to change, a reference in previous statements to elevated domestic price pressures and strong labour cost growth had been taken out on Thursday. Lagarde had, however, cautioned against over-interpreting such omissions and urged observers to focus more on what content was left in the statement.
• Investors are betting that the ECB is getting it wrong on both growth and inflation and will be forced to U-turn and deliver five rate cuts in rapid succession from early spring, with bets on an April rate cut increasing after Lagarde's press conference.
• However, the discrepancy in rate expectations stems from a different outlook on growth and how much past rate hikes are slowing economic activity across the 20 countries that use the euro currency - not least in Germany, where the closely watched Ifo survey pointed to worsening business sentiment.

 (Source: CNBC)

• The U.S. economy exceeded expectations in Q4, growing at a 3.3% annualized rate, with a full-year growth of 2.5%, defying concerns of a recession following aggressive interest rate hikes by the Federal Reserve.
• The Commerce Department's report indicated a further reduction in inflation pressures during the last quarter, suggesting that the central bank may not cut interest rates in March. However, rate cuts later in the year remain a possibility as inflation cools.
• The report concludes a year of remarkable economic growth, particularly noteworthy given the backdrop of the Fed's tightening monetary policy throughout the year. GDP growth was supported by strong consumer spending, increased exports, additional government spending, and a rise in business investment. The housing market also showed a modest gain.
• Despite expectations of a downturn, the U.S. economy demonstrated resilience, attributed to a robust labor market, low layoffs, strong wage gains, increased government spending, and near-zero interest rates during the COVID-19 pandemic.
• The Federal Reserve's aggressive rate hikes raised concerns, but the economy's robust performance led economists to revise their recession predictions. While financial markets indicate a probability of a rate cut in May, the Fed is expected to maintain the current policy rate range at its upcoming meeting.
• Consumer spending, a key driver of the economy, remained solid, supported by increased household income and savings from the pandemic era. Inflation remained subdued, with housing being a notable contributor to the core PCE price index. That said, the economy is still viewed as being in a disinflationary mode, with limited Fed influence on structural housing supply deficiencies.

(Source: Reuters)

• China hopes to work with Jamaica to synergize development strategies, expand cooperation in various fields, and enhance people-to-people and cultural exchanges, Chinese Foreign Minister Wang Yi said Saturday, January 20^th.
• Wang Yi made the remarks in a meeting with Prime Minister Andrew Holness at the Office of the Prime Minister, which was also attended by Jamaica's ministers of foreign affairs, finance, health and infrastructure as well as members of the Chinese delegation. Minister Wang was on a three-day visit aimed at strengthening the bilateral relationship between Jamaica and China.
• Holness mentioned that China did not hesitate to lend a helping hand when Jamaica encountered difficulties, which has strongly supported Jamaica's economic development. He further mentioned that Jamaica will continue to firmly adhere to the one-China policy, give priority to the relationship between Jamaica and China, and strive to build a strong strategic partnership between the two countries.
• Wang noted that China supports Jamaica in safeguarding its sovereignty, independence, and national dignity and playing a more important role in regional and international affairs. He highlighted that the Belt and Road cooperation between China and Jamaica has achieved fruitful results and has broad prospects.
• China also hopes to expand cooperation with Jamaica in fields such as trade, investment, new energy, agriculture, and the digital economy.
• In November 2023, Jamaica exported US$890K and imported US$96.7Mn from China, resulting in a trade deficit of US$95.8Mn. Between November 2022 and November 2023, the imports from China have decreased by US$-11.5Mn (-10.6%) from US$108Mn to $96.7Mn, while exports decreased by US$-2.38Mn (-72.8%) from US$3.27Mn to US$890K.

(Sources: China.org & OEC)

• The International Energy Agency (IEA) forecasts a record-breaking global oil supply of 103.5Mn barrels per day (b/d) in 2024. Guyana leads the production surge alongside the United States, Brazil, and Canada, contributing to a collective increase of 1.5Mn b/d.
• Guyana produced 142.9Mn barrels of oil from the ExxonMobil-operated Stabroek block in 2023. Currently, its production stands at 550,000 b/d. By the end of March, the South American producer is expected to hit 600,000 b/d.
• Contrary to this trend, the Organization of the Petroleum Exporting Countries (OPEC) anticipates maintaining a steady supply, assuming the phasing out of voluntary cuts by the second quarter of 2024. 
• OPEC’s latest report projects demand for its crude to reach 28.5Mn b/d in 2024, marking a 0.8Mn b/d increase from 2023. Furthermore, it is forecasted to rise to 29Mn b/d in 2025, indicating a 0.5Mn b/d increment from the previous year.
• OPEC Secretary-General Haitham Al Ghais said, “Peak oil supply has never come to pass, and predictions of peak oil demand are following a similar trend. Given the growth trends, it is a challenge to see peak oil demand by the end of the decade, a mere six years away.” 
• Despite the geopolitical risks, oil and liquefied natural gas (LNG) production remains unaffected, yet ship owners are redirecting cargoes from the Red Sea. Hundreds of giant container ships, some more than 300m (984ft) long, are now choosing a lengthy detour around Africa instead of heading up the Red Sea and through the Suez Canal on voyages from Asia to Europe. 
• Rerouting such large vessels is no easy task; the logistics involved can be enormous and time-consuming, pushing fears that the crisis could have widespread economic impacts, pushing up prices of goods and delaying deliveries of high-value products by weeks or perhaps even longer.

(Sources: Oil Now & British Broadcasting Corporation)

• The Banco Central de Costa Rica cut its policy rate from 6.00% to 5.75% and signalled that further cautious easing was on the way at its January 18 meeting.
• This was the seventh-consecutive reduction by the bank and the third-consecutive 25bps cut, which brought total easing in the current cycle to 300bps.
• The bank’s statement acknowledged that the country has been in deflation for some time, though it flagged risks such as high domestic economic and wage growth and the potential for conflict in the Middle East to drive up oil prices. In addition, it reiterated that it intends to continue easing at a gradual and cautious pace.
• That said, Fitch expects the rate to drop to 4.50% by end-2024, as inflation remains below target through the year due to steady oil prices and moderating economic activity.
• However, risks exist in both directions. On the upside, the conflict in the Middle East could send oil prices higher. At the same time, to the downside, the central bank could opt for a more aggressive approach if domestic economic data deteriorates more quickly than expected.

 (Source: Fitch Solutions)

• Investors are attracted to local bonds from emerging markets, anticipating significant returns due to shifting monetary policies, particularly in the context of faster interest rate adjustments by central banks in developing economies.
• Latin American domestic bonds are experiencing a notable rally, with a 24% increase in a Bloomberg gauge of local-currency government debt, outperforming their dollar-denominated counterparts. Speculation about a potential Federal Reserve rate cut in the U.S. will drive further gains in 2024.
• While Latin American bonds excel, other regions, such as Europe, the Middle East, Africa, and Asia, have seen varied performance in their domestic debts and currencies. Some currencies, like the Turkish lira, Russian ruble, and South African rand, have underperformed, while others, like the Czech and Hungarian rates, show promise.
• Solid demand for local assets in emerging markets provides financing opportunities for governments and corporations. The trend includes increased issuance of domestic debt, reaching $1.5 trillion in the current year, with countries like China, South Korea, India, Brazil, Russia, Thailand, and Saudi Arabia leading in local primary markets.
• The outlook suggests continued growth in corporate activity in Mexico's domestic bond market and potential sovereign issuance leadership in the first half of 2024.

(Source: Bloomberg)

• The Bank of Canada has maintained its policy rate at 5.0% for the fourth consecutive meeting. It explicitly stated that further rate increases may not be necessary if the economy aligns with its forecasts.
• Policymakers, led by Governor Tiff Macklem, expressed concerns about stalled economic growth and foresee a slow near-term recovery. The bank's communication signals a shift towards discussions on how long to maintain the current restrictive policy stance, potentially leaving room for rate cuts. The Canadian dollar depreciated post-announcement, and bond yields decreased.
• The bank acknowledges the need to balance risks but removed previous statements indicating a readiness to hike rates. Inflation concerns persist, but officials emphasized the importance of sustained easing in core inflation.
• The Bank of Canada revised its economic growth projection to 0.8% for the current year, highlighting a modest excess supply in the economy.
• Inflation is expected to remain close to 3.0% in the first half of 2024, gradually declining to around 2.5% by year-end, with a target of 2.0% in the following year. However, risks include housing price increases impacting inflation.

(Source: Bloomberg)

• Seprod Limited disclosed that it received a Take-Over Bid Offer Circular from Musson Investments Limited (MIL), offering to purchase up to 13,948,000 ordinary shares in Seprod at a cash price of $78.00 per share. This follows Musson’s recent purchase of 1,630 shares on January 5th, bringing its total ownership of Seprod to slightly over 50%.
• The Board of Directors of Seprod has since appointed an Independent Committee consisting solely of directors not affiliated with MIL and its associates to review the Offer and propose a recommendation to shareholders.
• The Offer Circular outlined that the offer will open on January 24, 2024, and close on February 15, 2024, and also mentioned Musson’s intentions with respect to Seprod following the completion of the share purchase.
• Musson has explicitly declared that it does not intend to modify Seprod’s business, alter Seprod’s arrangements with its employees, change the emoluments of the directors of Seprod, or pursue the delisting of Seprod.
• Following this announcement, Seprod’s stock price decreased by 1.85% on January 23, 2024, closing at $82.56. At this price, the stock trades at a P/E of 22.71x earnings, which is above the Main Market Manufacturing & Distribution Sector Average of 14.90x.

(Sources: JSE & NCBCM Research)

• Jamaica is set to receive a substantial financial boost of approximately $255Mn through its participation in the International Monetary Fund’s (IMF) Resilience and Sustainability Facility (RSF). While an agreement has been reached at the staff level, it remains subject to approval by the IMF Executive Board at its meeting scheduled for February 2024. Once approved, the funds will become accessible to Jamaica.
• IMF recently completed its Article IV review for the year 2024, a significant milestone for Jamaica’s economic prospects. During this process, a dedicated team, led by Esteban Vesperoni, engaged in a series of meetings held in Kingston and conducted a virtual mission with Jamaican authorities from January 8 to 18.
• Commending Jamaica on its notable accomplishments, Esteban Vesperoni highlighted that over the last few years, the country has successfully reduced public debt, anchored inflation, and strengthened its external position. He further stated that “supported by strong revenues and strict control of non-wage spending, a prudent fiscal stance continues to support a reduction in public debt, which is expected to reach 72% of GDP in FY2023/24—the lowest in 25 years—well below pre-pandemic levels.”
• The IMF’s assessment highlights Jamaica’s substantial progress in executing its policy agenda, both under the Precautionary and Liquidity Line and the Resilience and Sustainability Facility. Notably, both facilities received approval from the IMF’s Executive Board in March 2023, with a combined access limit of approximately US$1.732Bn.
• Finance Minister Dr. Nigel Clarke emphasized the significance of the latest review, stating, “The IMF staff press release confirms that Jamaica’s economy is on firm footing and our economic programme is achieving its targets and objectives.”
• The highlighted indicators underscore the country’s strong economic position and commitment to sound financial management.

(Sources: IMF & Caribbean National Weekly)

• On January 15, 2024, the Senior Minister in the Office of the President with Responsibility for Finance, Dr Ashni Singh announced a $1.146Trn national budget for Guyana’s development in 2024. This has thus far been the largest budget in the country’s history, representing a 46.6% increase from the $781.9Bn 2023 budget.
• Notably, the oil and gas sector’s contribution to the country’s developmental thrust in 2024 will increase by 91.9% from the 2023 figure. This implies that while $125.1Bn from oil revenues supported the national budget in 2023, this year, $240.1Bn from the Natural Resource Fund will be used to cushion the trillion-dollar budget.
• The oil and gas industry has benefited the country’s economic development significantly, both by the direct increase in revenues through earnings from Guyana’s profit shares, as well as the economic boom that was triggered by the emergence of the sector.
• For context, from 2015, the year of the first oil discovery, to 2024, the national budget has increased by over 518% (the 2015 budget was $221Bn).
• Over the last several years, the increasing budget has resulted in tangible infrastructural benefits for Guyanese through the injection of oil revenues into infrastructural development, such as improved roads, healthcare facilities, and upgraded utilities. These transformative investments will continue to benefit the quality of life of Guyanese while also increasing the country’s investment prospects.
• Guyana is poised to become a major player in the global energy landscape, cementing itself as a beacon of progress and prosperity. With continued financial backing from the oil sector, the momentum is expected to continue throughout 2024.

(Source: CariCris)