• The Board of Directors of the Central Bank of Costa Rica (BCCR) maintained the policy rate at 9% on Dec. 14. The BCCR previously raised the policy rate for a cumulative 825bps across eight consecutive meetings beginning back in December 2021.
• The decision to maintain the policy rate reflects the three consecutive months of declining headline and core inflation as well as the fall in inflation expectations. The headline and core inflation were 8.3% and 5.7% as of November 2022 respectively, while 12-month inflation expectations reached 6%.
• The restrictive policy rate has been deemed effective following the recent decline in inflation, with BCCR noting its expectation to remain in this position to mitigate risks towards the convergence of inflation to the central bank’s 3% target band.
• The improved data led the BCCR to revise its inflationary outlook, with the expectation for headline inflation to now reach the target band some time in H1 2024 compared to H2 2024 from the previous monetary policy meeting.
• Headline inflation is now 390bps below its peak August 2022 level. Monthly economic activity data from October show a further slowdown in the Costa Rican economy, which coincides with the easing of inflation. Economic activity moderated to 2.2% y-o-y in October compared to the 4.9% y-o-y growth through the first ten months.

(Source: LATAM & Caribbean Weekly)

• European Union energy ministers on Monday, Dec. 19 agreed on a gas price cap after weeks of talks on the emergency measure that has split opinion across the bloc as it seeks to tame the energy crisis. The cap is the 27-country EU's latest attempt to lower gas prices that have pushed citizens' energy bills higher and driven record-high inflation this year after Russia cut off most of its gas deliveries to Europe.
• Ministers agreed to trigger a cap if prices exceed 180 euros per megawatt hour for three days on the Dutch Title Transfer Facility (TTF) gas hub's front-month contract, which serves as the European benchmark, EU officials and a document seen by Reuters showed.
• The cap can be triggered starting from Feb. 15 2023, the document detailing the final deal showed. The deal will be formally approved by countries in writing, after which it can enter into force. Once implemented, it would prevent any trades on the front-month to front-year TTF contracts at a price more than 35 euros/MWh above a reference level based on existing liquefied natural gas (LNG) price assessments, two EU officials told Reuters.
• The deal follows months of debate on the idea and two previous emergency meetings that failed to clinch an agreement among countries that disagreed on whether a price cap would help or hinder Europe's attempts to contain the energy crisis.

(Source: Reuters)

• The Biden administration said Friday, Dec. 16, it is buying 3 million barrels of oil to begin to replenish U.S. strategic reserves that officials drained earlier this year in a bid to stop gasoline prices from rising amid production cuts by OPEC and a ban on Russian oil imports. Global oil prices were rising even before Russia invaded Ukraine last February. When Biden announced a ban on Russian oil imports in early March, he acknowledged it would come at a cost to American consumers.
• President Joe Biden withdrew 180 million barrels from the Strategic Petroleum Reserve starting in March, bringing the stockpile to its lowest level since the 1980s. The reserve now contains roughly 400 million barrels of
• The purchase, to begin in January, will start to replenish the reserve and is likely to be followed by additional purchases, officials said. Contracts for the purchase will be awarded by Jan. 13, with deliveries to an SPR site in Texas expected in February.
• The Energy Department called the purchase “a good deal for American taxpayers″ since the price will be lower than the $96 per barrel average the U.S. oil was sold for. The replenishment also will strengthen U.S. energy security, the department said in a statement. The purchase price was not announced, but benchmark West Texas Intermediate crude oil was selling at $74.50 per barrel late Friday. Gasoline prices, meanwhile, averaged about $3.18 per gallon on Friday, down from $3.74 a month ago and just over $5 per gallon at their peak in June, according to the AAA auto club.

(Source: AP News)

• For November 2022, the All-Jamaica Consumer Price Index (CPI) increased by 0.4%. Furthermore, November’s point-to-point inflation of 10.3% showed an uptick relative to October’s point-to-point inflation figure of 9.9%.
• For November, the rise in monthly inflation was largely driven by the 2% increase in the heavily weighted ‘Food and Non-Alcoholic Beverages’ division. All classes within the ‘Food and Non-Alcoholic Beverages’ division increased for the review period with the main contributor being ‘Vegetables, tubers, plantains, cooking bananas and pulses’ which rose by 6.5%. This was due to higher prices for agricultural produce such as sweet potato, tomato, cabbage and sweet pepper
• Though there was an uptick in the point-to-point outturn in November, the current rate of 10.3% is keeping with expectations, as the BOJ noted that inflation was projected to stabilize in the range of 9.0% to 11.0% for the remainder of 2022. 
• On December 20, 2022, the BOJ will have its monetary policy meeting, however, at its last meeting, it was deemed appropriate to pause further policy rate increases and watch the previous rate hikes pass through to deposit and loan rates. Consequently, despite the slight increase in point-to-point, we expect the BOJ to maintain its policy rate at 7.00%.  

(Source: STATIN and NCBCM Research)

• Lumber Depot reported a net profit of $78.20Mn for its six months ended October 31, 2022, which represents a decline of 27.1% relative to the previous period of 2021.
• Despite seeing revenue growth of 2.2%, Lumber’s customer base reacted negatively to economic conditions, including higher interest rates and increased prices for certain key construction inputs and hardware items. Additionally, its cost of sales increased by 6.9% which put some pressure on its gross margin.
• Going forward, the outlook for Lumber Depot is uncertain as the factors that adversely impacted their financial performance in the past six months are expected to remain in the near term. Consequently, the company is likely to underperform in its subsequent quarters.
• LUMBER’s stock price has decreased by 23.3% since the start of the calendar year. The stock closed Thursday’s trading session at $2.32 and currently trades at a P/E of 10.5x which is below the Junior Market Distribution Sector Average of 16.9x.

(Sources: JSE and NCBCM Research)

• The Bank of Mexico raised its key interest rate by an expected 50 basis points to a record 10.50% on Thursday, tempering its monetary tightening pace amid a slowdown in inflation while suggesting it could hike rates at least one more time.
• The split decision follows four consecutive 75-basis-point hikes and comes after the U.S. Federal Reserve raised its key interest rate by 50 basis points Wednesday after four consecutive hikes of its own of three-quarters of a percentage point.
• "The board considers it will still be necessary to raise the reference rate in its next monetary policy meeting," said Banxico, as the Mexican central bank is known. "Subsequently, it will assess if the reference rate needs to be further adjusted as well as the pace of adjustments based on the prevailing conditions," it added.
• Mexico's headline inflation in November slowed to 7.8%, its lowest level since May. However, annual core inflation, which strips out some volatile food and energy prices, rose to 8.51%, foreboding more monetary policy tightening as Banxico works to get inflation to its target of 3%, plus or minus one percentage point.
• Banxico has now raised its benchmark by 650 basis points since June 2021.

(Source: Reuters)

• Brazil's central bank already believes a recently proposed spending package is partly affecting closely watched inflation expectations, said the bank's chief Roberto Campos Neto. Notably, policymakers have highlighted inflationary risks arising from leftist President-elect Luiz Inacio Lula da Silva's 168Bn reais ($31.5Bn) spending proposal to meet his campaign promises. 
• For its current inflation projections, Neto noted that the central bank has considered a fiscal expansion of 130Bn reais next year extracted from market estimates. Notably, the central bank held interest rates at 13.75% this month, after a September pause to an aggressive tightening that lifted rates from a 2% record low in March 2021 to battle inflation.
• Faced with expected pressure on the public debt due to booming expenses, economists have taken a more conservative stance on when rate cuts would begin in Latin America's largest economy, with some predicting hikes to be even resumed next year.
• However, Neto pointed out that coordination between fiscal and monetary policies is "very important," and the central bank needs proper conditions to lower rates.
• He also said that returns to sizeable subsidized credit would negatively impact the neutral interest rate and reduce monetary policy power, praising the long-term rate as an "institutional gain" that helped the capital markets expansion. The long-term rate was implemented in 2018 to bring the cost of state-run development bank BNDES lending rates in line with those of the market. The government transition team recently said it is too high and should be reformed.

(Source: Reuters)

• The European Central Bank eased the pace of its interest rate hikes on Thursday but stressed significant tightening remained ahead and laid out plans to drain cash from the financial system as part of a dogged fight against runaway inflation.
• After being wrong-footed by sudden price rises, the ECB has been raising rates at an unprecedented pace. Inflation has soared since economies reopened after the COVID-19 pandemic, driven by supply bottlenecks and then surging energy costs following Russia's invasion of Ukraine.
• In a move shadowing similar steps this week by the Federal Reserve and Bank of England, it raised the rate it pays on bank deposits by 50 basis points to 2%, moving further away from a decade of ultra-easy policy. That decision, which was expected, marked a slowdown in the pace of tightening from 75-basis-point increases at each of the ECB's two previous meetings, as price pressures show some signs of peaking and a recession looms.
• But to secure a majority for that slowdown, ECB President Christine Lagarde had to offer dissenters a pledge that rates will be increased again, potentially as many as three times, by the same amount. Money markets immediately moved to price in a peak deposit rate of just over 3% by July, compared to 2.75% before the meeting. The ECB is pushing hard to persuade investors of its commitment to fighting higher prices after lagging the Fed and BoE in raising rates.
• The ECB's new projections on Thursday showed inflation above the ECB's 2% target through 2025. ECB President Christine Lagarde said inflation may still come in higher than that, citing the possibility of a bout of stronger-than-expected wage growth and of a boost to demand from government support measures across the 19 eurozone countries.

(Source: Reuters)

• China’s reopening could bring opportunities as well as risks to its economy, Albert Park, chief economist at the Asian Development Bank told CNBC. Although the lifting of COVID restrictions in China would boost growth prospects for the country and other economies, it could also lead to an increase in COVID-19 cases.
• There could be “waves in different parts of the country at different times,” Park said. “And there’ll be a strong temptation by the government to reimpose controls or step back. That could be very disruptive for economic activity.” But that is the price the government would have to pay if it wants the country to open up and transition back to life without the zero-Covid policy, he added.
• This week, ADB downgraded its 2022 growth forecast for China to 3% from its previous projection of 3.3%. It also predicted China’s economy would grow by 4.3% in 2023, downgrading its September growth estimates of 4.5%.
• Recurring lockdowns in China are one of the three big headwinds that are slowing down the region’s recovery from the pandemic, according to ADB. Monetary policy tightening by central banks around the world and the prolonged Russia-Ukraine war are factors contributing to slower growth as well, the bank said.

(Source: CNBC)

• Massy Holdings Ltd. advised that on December 7, 2022, its Board of Directors approved the acquisition of Rowe’s IGA Supermarkets by Massy Stores (USA) LLC, a wholly-owned subsidiary of the Company. Rowe’s IGA was established in 2005 and is a well-recognised brand within the Jacksonville area.
• Massy Stores USA entered into a Membership Interest Purchase Agreement with the sole owner of Rowe’s IGA, Robert A. Rowe, to purchase 100% of the equity interest of each of the seven limited liability companies within Rowe’s IGA Group for US$47Mn. The acquisition was completed simultaneously on December 12, 2022.
• The acquisition of Rowe’s IGA, an independent supermarket chain with seven stores in Jacksonville, Florida, is aligned with the Massy Integrated Retail Portfolio’s strategy to expand its retail footprint in the US market.
• The acquisition will represent a 1% increase in the Massy Group’s assets and is expected to contribute to an increase in the Group’s profit before tax of approximately 4% for FY2022/23. For the Integrated Retail Portfolio, the acquisition is expected to increase its profit before tax by 7%.

(Source: JSE)