• Fitch anticipates that Banxico will hike by 75bps (to 9.25%) at its meeting on September 29, and then to 9.75% on November 10 and to 10.00% on December 15. This is an upward revision compared to the previous forecast that policymakers would only take the rate to 9.50% by the end of the year.
• The revision is buoyed by surprisingly strong inflationary pressures that will encourage policymakers to tighten policy further and more aggressive rate hikes by the US Federal Reserve (Fed) over the remainder of the year, which will prompt Banxico to step up its own rate hiking cycle in response. 
• Notably, while the spike in inflation this year has been driven in part by higher food and fuel prices following the Russian invasion of Ukraine, core price pressures have also continued to gain steam, suggesting that price pressures are broad-based and likely to persist. 
• Risks to the forecast for 2022 remain to the upside but are more balanced in 2023. In the near term, Fitch forecast two risks: firstly, inflation continues to accelerate or comes down more slowly than currently forecast. Secondly, the US Fed opts for even more aggressive hikes than currently forecast. In either scenario, Banxico would likely hike the rate past 10.00% by end-2022.

(Source: Fitch Solutions)

• The Bank of England raised its key interest rate to 2.25% from 1.75% on Thursday and said it would continue to "respond forcefully, as necessary" to inflation, despite the economy entering a recession.
• The BoE estimates Britain's economy will shrink 0.1% in the third quarter - partly due to the extra public holiday for Queen Elizabeth's funeral - which, combined with a fall in output in the second quarter, meets the definition of a technical recession.
• Economists polled by Reuters last week had forecast a repeat of August's half-point increase in rates, but financial markets had bet on a three-quarter-point rise, the biggest since 1989, barring a brief, failed attempt in 1992 to support the sterling.
• The BoE move follows the U.S. Federal Reserve's decision on Wednesday to raise its key rate by three-quarters of a percentage point, as central banks worldwide grapple with post-COVID labour shortages and the impact of Russia's invasion of Ukraine on energy prices.
• The BoE now expects inflation to peak at just under 11% in October, below the 13.3% peak it forecast last month before Liz Truss won the Conservative Party leadership and became Britain's prime minister with a promise to cap energy tariffs and cut taxes.

(Source: Reuters)

• The European Commission on Wednesday approved up to 5.2 billion euros (roughly $5.2 billion) in public funding for hydrogen projects, a move it said could unlock a further 7 billion euros of investments from the private sector.
• The executive arm of the EU said the bloc’s flagship project to support the research, deployment and construction of hydrogen infrastructure, referred to as IPCEI Hy2Use, had been prepared by 13 member states that will supply the public funding.
• The commission said IPCEI Hy2Use would support the construction of “large-scale electrolysers and transport infrastructure, for the production, storage and transport of renewable and low-carbon hydrogen.”
• The initiative will focus on developing “innovative and more sustainable technologies for the integration of hydrogen into the industrial processes of multiple sectors” like glass, cement and steel.

(Source: CNBC)

• Main Event Entertainment Group (MEEG) reported a net profit of $103.94Mn for its nine months ending July 31, 2022, which represents a $94.77Mn increase relative to the prior period. This increase was mainly attributed to an 84.6% increase in revenues.
• The improved performance of the nine months was underpinned by increased activity from the recovering entertainment industry. The entertainment industry has seen a strong return of outdoor events and lifestyle experiences after a nearly 2-year hiatus, and this has had a positive effect on MEEG. In fact, its third-quarter revenue outturn of $601.53Mn represents the highest quarterly outturn in the company’s history.
• The entertainment industry is expected to continue recovering in the coming months and is expected to be supported by other recovering industries such as tourism which bodes well for entertainment services companies like Main Event. However, the high inflation environment presents risks to consumers' spending on non-discretionary services such as entertainment services.
• MEEG’s stock price has increased by 85.4% since the start of the calendar year. The stock closed Tuesday’s trading session at $8.34 and currently trades at a P/E of 22.5x which is above the Junior Market Sector Average of 20.7x.

(Source: JSE and NCBCM Research)

• Fitch modestly revised its forecast for Mexico’s 2022 current account deficit from 0.9% of GDP to 0.7%, with the expectation that strong remittance inflows will offset a wider goods and services trade deficit.
• In 2023, the current account deficit will widen slightly, to 0.8%, as a slowdown in remittances, driven by weaker growth in the US, outweighs the impact of a slightly narrower goods and services trade deficit.
• These projected current account deficits are notably narrower than the 1.6% of GDP averaged in the decade before the pandemic, posing little risk to Mexico’s external position.
• Importantly, the Agency does not foresee a major risk to Mexico’s external account stability, given modest deficits and stable stock of reserves; however, a dispute settlement consultation between Mexico, the US and Canada is a downside risk to exports in the medium term.

(Source: Fitch Solutions)

• Oil prices dipped on Tuesday, following other risk assets lower, as the dollar stayed strong and investors anticipated more central bank interest-rate hikes designed to quell inflation.
• The U.S. Federal Reserve is likely to raise interest rates by another 75 basis points on Wednesday to rein in inflation. Those expectations are weighing on equities, which often move in tandem with oil prices. Other central banks, including the Bank of England, meet this week as well.
• Higher rates have bolstered the dollar, which remained near a two-decade high against peers on Tuesday, making oil more expensive for holders of other currencies.
• "The oil market is caught between downward concerns and upside hopes. The concerns are driven by the aggressive monetary tightening in the U.S. and Europe, which is increasing the likelihood of a recession and might weigh on oil demand prospects," said Giovanni Staunovo, commodity analyst at UBS.

(Source: Reuters)

• The U.N. secretary-general said Tuesday that developed economies should impose an extra tax on the profits of fossil fuel firms, with the funds diverted to countries affected by climate change and households struggling with the cost-of-living crisis.
• In a wide-ranging address to the U.N. General Assembly in New York, Antonio Guterres described the fossil fuel industry as “feasting on hundreds of billions of dollars in subsidies and windfall profits while households’ budgets shrink and our planet burns.”
• Fossil fuel firms and their “enablers” needed to be held to account, he went on to state. “That includes the banks, private equity, asset managers and other financial institutions that continue to invest and underwrite carbon pollution.”

(Source: CNBC)

• For the period January to May 2022, Jamaica’s total spending on imports was valued at US$3,050.0Mn which represents a 34.1% increase relative to last year, while earnings from exports amounted to US$641.4Mn which represents a 2.8% decline relative to the prior period.
• The increase in imports was primarily attributed to higher imports of “Fuels and Lubricants”, “Raw Materials/Intermediate Goods” and “Consumer Goods”, which rose by 56.0%, 28.1% and 35.9% respectively.
• Meanwhile, the fall in the value of exports was due primarily to a 59.0% decline in the value of exports of “Crude Materials (excl. Fuels)”. Domestic exports from January to May 2022 fell by 6.1% to US$531.7 million, due to a 60.7% decline in exports from the Mining and Quarrying industry as this industry has been negatively affected by Jamalco’s plant closure after its fire in August 2021. Earnings from domestic exports accounted for 82.9% of total exports.
• The value of imports for the period January to May 2022 from Jamaica’s five main trading partners, the United States of America (USA), Brazil, China, Trinidad and Tobago and Japan, was US$1,977.4 million, representing 64.8% of the total imports.
• The top five destinations for Jamaica’s exports were the USA, Puerto Rico, Canada, the United Kingdom and the Russian Federation. The value of exports to these countries increased by 25.2% to US$517.0 million, due mainly to higher exports of fuels to the USA.

(Source: STATIN)

• Jamaica’s tourism earnings are expected to be “significantly higher” this year, exceeding pre-COVID-19 levels, according to Tourism Minister, Hon. Edmund Bartlett.
• The ministry now expects that Jamaica will earn in excess of US$4 billion this year, which would exceed 2019 figures by between US$500 million to US$600 million. This growth is expected to be supported by an increase in visitor arrivals, including cruise ship arrivals which are projected to be above three million, which is similar to 2019 figures.
• Overall, visitors are staying longer in Jamaica and are spending more. In 2019, the average length of stay for visitors would have been approximately 7 nights. In 2022, visitors are staying just over eight nights. Additionally, the average daily spending rate in 2019 was approximately US $168 per person, per day while in 2022, the rate is US $180 per person, per day.

(Source: JIS News)

• Fitch expects that economic growth in Latin America will ease in the latter half of 2022, making it an underperformer compared with other regions.
• Latin America's real GDP growth will only be 3.0% in 2022 and 1.8% in 2023, making it a global underperformer, outpacing only EM Europe among the world’s major regions.
• The economic tailwinds of the post-pandemic recovery will continue to give way to headwinds posed by weak demand in key export markets and persistent inflationary pressures.
• Inflationary pressures will weigh on private consumption in most of the region’s major markets, while the deteriorating US growth outlook will depress exports from and remittance inflows to the region.
• Additionally, elevated political uncertainty will also play a significant role in dampening investment growth throughout the region.

(Source: Fitch Solutions)