• The European Central Bank (ECB) cut interest rates by 25 basis points (bps) on Thursday for the third time this year, saying inflation in the eurozone bloc was increasingly under control, while the outlook for the economy was worsening¹.
• ECB president Christine Lagarde did not provide hints about future moves, but four sources close to the matter told Reuters a fourth cut in December is likely unless economic or inflation data turns around in the coming weeks. The U.S. elections, and the threat of fresh trade tariffs if Donald Trump is elected president, were seen as a major source of uncertainty, the sources said. Asked about that risk, Lagarde said any trade obstacles were a "downside" for Europe.
• However, she added that the ECB did not expect a recession at present and was still working on the assumption that the economy would stage a "soft landing", jargon for lower - but still positive - growth. The quarter-point cut brings the rate that the ECB pays on banks' deposits down to 3.25%. Money markets are almost fully pricing in three further reductions through next March.
• Prices grew by just 1.7% last month, falling below the 2.0% target for the first time in three years. While inflation may edge above the ECB's target by the end of this year, it is expected to hover around that level for the foreseeable future. The ECB noted pay rises are still supporting "domestic inflation" - that is growth in the price of services and goods that don't rely much on imports - but this too was waning.
• High interest rates have sapped investment and economic growth, which has been weak for nearly two years. The most recent data, including industrial output and bank lending, is pointing to more of the same in the coming months. A resilient labour market is also starting to show cracks, with the vacancy rate - or the proportion of vacant jobs as a share of the total jobs - falling from record highs. This has fuelled calls inside the ECB and from politicians from Germany to Italy to ease policy before it is too late.
• Nonetheless, some of the economic weakness is due to structural problems, such as the high energy costs and low competitiveness hobbling Europe's industrial powerhouse Germany. Lagarde repeated the ECB's customary call on Europe's politicians to push ahead with "ambitious" reforms to make the region's economy more productive, competitive and resilient.

(Source: Reuters)

• The number of Americans filing new applications for unemployment unexpectedly fell last week, but could remain elevated in the near-term amid the effects of Hurricanes Helene and Milton, obscuring the labour market picture.
• Initial claims for state unemployment benefits dropped 19,000 last week to a seasonally adjusted 241,000 for the week ended Oct. 12, the Labor Department said on Thursday.
• Economists polled by Reuters had forecast 260,000 claims for the latest week. Claims jumped to more than a one-year high in the prior week, attributed to Helene, which devastated Florida and large swathes of the U.S. Southeast in late September. The ebb in filings from Helene is likely to be offset by an anticipated deluge of claims due to Milton, which slammed into Florida weeks after Helene.
• A month-long strike by roughly 33,000 machinists at Boeing, which is having ripple effects on the planemaker's supply chain and its non-striking workforce, is also blurring the labour market view. Boeing had been struggling with a multitude of problems before the strike by its unionised West Coast workers and announced 17,000 job cuts last week.
• The claims report covered the week during which the government surveyed employers for the nonfarm payrolls component of October's employment report. Economists expect Federal Reserve officials won't place too much weight on the employment report when they meet in early November. The report will be released days before the Nov. 5 U.S. presidential election.
• Nonfarm payrolls increased by the most in six months in September, with the unemployment rate falling to 4.1% from 4.2% in August. The U.S. central bank last month cut its benchmark interest rate by an unusually large 50 basis points to the 4.75%-5.00% range, the first reduction in borrowing costs since 2020, highlighting rising risks to the labour market.

(Source: Reuters)

• The Board of Directors of iCreate Limited (transitioning to Kintyre Holdings (JA) Limited) has announced that the company has signed a Letter of Intent (LOI) to acquire a 20% equity stake in MVL, which operates Beach Club Resorts, Restaurants, and Lounges in the British Virgin Islands (BVI).
• This investment will provide iCreate with common shares that include full voting rights and entitlement to any dividends declared by the entity.
• MVL is a profitable company with strong cash flows that is looking to expand. The transaction is subject to satisfactory due diligence, including a review of MVL's financial statements, asset valuations, and legal documentation. Finalising the investment will depend on executing a definitive Share Purchase Agreement, which will disclose the agreed purchase price.
• The proposed name-change from iCreate Limited to Kintyre Holdings (JA) Limited marks the company's transformation from a digital and creative training entity to a diversified digital and creative group. This shift reflects its strategy to broaden its business lines.

(Source: JSE &NCBCM Research)

• Economist in the Ministry of Finance and the Public Service, Keenan Falconer, says the Government’s first structured securitisation transaction in the international capital markets is a sign of confidence by international investors in the quality of Jamaica’s financial instruments.
• The Government of Jamaica successfully raised US$480Mn by securitising assets associated with the Norman Manley International Airport (NMIA). Mr. Falconer clarified that securitisation involves transforming an asset into a financial security—an instrument with inherent value that typically generates interest—allowing it to be sold for revenue generation.
• “In this case, the Government has grouped together expected revenue sources over the next 12 years that are due to the NMIA and converted it into a bond, which is the security. They then sold this security to an investor or group of investors in the international capital markets,” he noted. Under the transaction, investors will have the right to collect revenue from those who owe money to the NMIA for the next 12 years, while the Government receives cash upfront from the sale.
• After accounting for transaction fees, the net proceeds will be used to reduce some interest costs on the national debt and to provide budgetary support for ongoing expenses, including funding government programs and paying wages and salaries. “Some of the funds will also be used to finance capital expenditure through greater spending on new infrastructure projects like the SPARK programme,” Mr. Falconer noted.
• This transaction means that the Government will now be able to receive cash to pursue its development objectives and implement initiatives announced in the Budget for the rest of the fiscal year. Furthermore, Mr. Falconer told JIS News that despite the issuance of a bond, which is a debt instrument, “this transaction means that Jamaica does not take on any additional debt”
• A special purpose vehicle (SPV), Kingston Airport Revenue Finance (KingAir) was created to oversee and manage the bond. The entity’s primary role is to collect the proceeds from the international investors paying for the bond, and to remit those funds to the Government of Jamaica, Mr. Falconer explained. As a result, the Government has granted KingAir rights to 52.33% of the revenue generated by the NMIA allowing the company to carry out its functions in exchange for the funds raised.

(Source: JIS)

• Brazil's government is preparing to cooperate more closely with the central bank on regulatory issues like cryptocurrencies and meal vouchers next year when the bank gets new leadership, following occasional differences over policy on such matters.
• Incoming central bank chief Gabriel Galipolo, whose term starts in January following his appointment by President Luiz Inacio Lula da Silva, has delivered a hawkish message on monetary policy, showing he is not shy about hiking interest rates despite Lula's repeated demands for lower borrowing costs.
• However, the two are likely to find more common ground on regulatory matters, where the central bank has sometimes been at loggerheads with the Finance Ministry in recent years.
• Three Finance Ministry officials described on condition of anonymity a series of frustrated discussions with the central bank on matters ranging from regulation of crypto assets to allowing global trading platforms to list Brazilian public debt. Two of the ministry sources said that collaboration had suffered as the central bank became more withdrawn from policy discussions since gaining formal autonomy under a 2021 law.
• One official pointed to concerns about crypto asset regulation, which is being handled by the central bank without coordination with the government. That has complicated Finance Ministry policy on regulating online gambling since many sites are operating with cryptocurrencies, the source said. The central bank said earlier this year it expected to finalize its proposed crypto regulations by the end of the year.
• On another front, the government plans to resolve a long-standing impasse over new regulations to open up competition in the 150Bn reais (US$26.5Bn) meal voucher market. For years, tech companies, including Mercado Libre (MELI.O), have been looking to take a bigger bite of the market dominated by companies such as Sodexo and Edenred (EDEN.PA), for meal cards that firms must provide for full-time workers.
• Despite the impasses, the ministry sources expressed hopes for more collaboration with Galipolo in charge. A central bank source said improved cooperation would reset the "tone" of the relationship. "I really hope we'll have more integration on issues that don't affect the central bank's core (inflation) mandate," said another ministry source. "I'm not saying we want a seat on the Monetary Policy Committee - that's not it.

(Source: Reuters)

• Fitch Solutions maintains its forecast that real GDP growth in Barbados will slow from an estimated 6.3% in 2023 to 3.1% and 2.1% in 2024 and 2025, respectively.
• While Fitch’s outlook suggests a continued growth slowdown from 11.3% in 2022, it will remain strong by historical standards (growth averaged 0.0% between 2010 and 2019) and is underpinned by the continued expansion of the tourism sector as well as an upbeat outlook for private consumption.
• Of note, slowing inflation, alongside a continued recovery in the tourism sector, will provide tailwinds to private consumption in 2024. Price growth remains benign, coming in at just 1.2% year-on-year (YoY) in July 2024, and Fitch expects this to remain the case in the coming months thanks to a continued easing of global commodity prices.
• Combined with falling unemployment, Fitch believes that real household incomes are likely to perform well this year, boosting spending levels. Additionally, overnight stays are up 14.5% YoY to August and will continue to support direct (and indirect) job creation, boding well for consumer spending.
• That said, risks to the growth projections are to the downside. Should political tensions in the Middle East escalate and prompt a surge in global oil prices, this would feed into higher inflation in Barbados, blunting real incomes and constraining household expenditure. This would also likely limit growth in tourist arrivals.
• Moreover, severe weather conditions remain an ever-present risk to the Barbadian economy, with hurricanes posing a threat to both critical infrastructure and tourist arrivals. 

(Source: Fitch Solutions)

• British inflation slowed sharply last month and key price gauges watched by the Bank of England also fell, bolstering bets on a November interest rate cut and helping finance minister Rachel Reeves before her first budget.
• Annual consumer price inflation eased to 1.7% in September from 2.2% in August, the lowest reading since April 2021. The easing inflation was driven down by lower airfares and petrol prices, the Office for National Statistics said. A Reuters poll of economists had pointed to a reading of 1.9%.
• Interest rate futures showed investors were putting a 90% chance on two BoE quarter-point rate cuts by the end of this year, up from a roughly 80% chance on Tuesday. "Today's release removes another potential obstacle to the Monetary Policy Committee voting for a 25bps rate cut at its November meeting," said Martin Swannell, chief economist adviser to the EY ITEM Club consultancy.
• A less inflationary outlook would slightly improve the economic and fiscal outlook for the budget as Reeves struggles to find the extra money to invest in public services and new infrastructure without spooking investors.
• September's inflation reading is also used as a base month for many social benefits. Wednesday's weaker-than-expected reading may disappoint recipients, although it could offer Reeves a little extra leeway for her budget plans.

(Source: Reuters)

• U.S. import prices fell by the most in nine months in September amid a sharp decrease in the cost of energy products, pointing to a benign inflation outlook that keeps the Federal Reserve on course to continue cutting interest rates.
• The report from the Labour Department on Wednesday also showed import prices, excluding fuel, barely rising over the past three months. The report followed data last week showing slightly firmer consumer prices in September.
• While producer prices were unchanged last month, some components showed strength, which was expected to translate into higher monthly readings in the key inflation measures tracked by the U.S. central bank for its 2% target.
• "Import prices do not feed through directly to producer and consumer prices but are a signal inflationary pressures remain muted and adds some support to another rate cut in November," said Matthew Martin, a senior U.S. economist at Oxford Economics. "In tandem with falling prices at China's factory gates, import price gains will be modest."
• Import prices slipped 0.4% last month, the biggest drop since December 2023, after a revised 0.2% decrease in August, the Labor Department's Bureau of Labour Statistics said. Import prices were previously reported to have declined 0.3% in August. The drop in import prices, which exclude tariffs, was in line with economists' expectations.

(Source: Reuters)

• After the spike in August, consumer prices moderated in September with 12-month point-to-point (P2P) inflation coming within BOJ’s 4.0.0% to 6% target range at 5.7%.
• Despite this lower turnout relative to August, prices in the most volatile divisions have increased on average. The ‘Food and Non-Alcoholic Beverages’ rose 6.9%, ‘Transport’ was 9.1% higher and ‘Housing, Water, Electricity, Gas and Other Fuels Divisions was up 3.6%.
• Meanwhile, the month-over-month inflation rate decreased to 0.2%, with the All-Jamaica Consumer Price Index (CPI) falling from 140.7 in August to 140.5. A 4.0% drop in the 'Housing, Water, Electricity, Gas, and Other Fuels' category. Reduced electricity rate was the main driver of the moderation in prices month over month. In September, the Jamaica Public Service (JPS) announced a 34% reduction in the Fuel Charge component of customers’ bills. The  Fuel Charge component is a significant part of electricity bills.
• Additionally, a 0.3% decrease in the 'Transport' division, linked to lower petrol prices, also contributed to the overall reduction in inflation for the month.
• However, the decline was somewhat offset by a 0.7% increase in the index for the 'Food and Non-Alcoholic Beverages' division and a 5.8% rise in the 'Education' division. The increase in the 'Food and Non-Alcoholic Beverages' division reflects an increase in the prices of a range of produce, including some vegetables, roots and tubers. For the ‘Education’ division, the upward movement was attributed to higher tuition fees for private schools at the primary level.
• In the 'Education' division, the increase was largely due to rising tuition fees for private primary schools.
• The Bank of Jamaica’s (BOJ’s) latest Monetary Policy Committee (MPC) communication emphasised that current economic conditions are favourable for sustaining low, stable, and predictable inflation going forward which could pave the way for further rate cuts. This viewpoint remains unchanged, despite preliminary estimates suggesting a significant slowdown in Q2 GDP and the expected contraction in Q3, given the damage from Hurricane Beryl.

(Source: STATIN & NCBCM Research)

• Jamaica’s tourism sector is poised for continued growth, as global travel is expected to reach 1.5Bn travellers by the end of this year, with projections indicating nearly 3 billion tourists worldwide over the next two decades.
• Minister Bartlett encouraged local tourism partners to embrace innovation and adaptability in response to emerging trends, stressing the importance of preparing for the increasing influx of travellers by building capacity and providing exceptional service. He highlighted the resilience of the tourism sector, which has consistently outpaced overall global economic growth, expanding at an annual rate of 3% over the past 30 years. However, the Minister also warned that Jamaica must remain agile and innovative to navigate the evolving global landscape.
• In his presentation, Minister Bartlett unveiled a key strategy to expand Jamaica’s tourism market by increasing airlift from South America, starting with LATAM Airlines' new flights from Peru to Jamaica, set to begin on December 1. He also mentioned ongoing discussions with Azul Airlines to introduce flights from Belem, Brazil, and with Avianca regarding additional routes in South America, including Colombia. Minister Bartlett emphasized that enhancing airlift is essential for accessing new markets and further diversifying Jamaica’s visitor base.
• Additionally, Minister Bartlett announced plans for a marketing blitz in India, one of the fastest-growing economies in the world, with a roadshow scheduled for November. He also emphasized efforts to target Eastern Europe and the Schengen area, pointing out that these regions present significant potential for inbound tourism.
• To bolster these initiatives, the tourism minister announced at the JHTA’s  63rd Annual General Meeting that the Jamaican government has allocated J$1Bn for tourism marketing through the end of the financial year. Minister Bartlett expressed confidence that, with these strategies in place, Jamaica’s tourism sector is well-equipped for sustained success.

(Source: Travel Daily News)