• The Federal Reserve on Wednesday raised interest rates by a quarter of a percentage point and laid out an aggressive plan to push borrowing costs to restrictive levels by next year as concerns about high inflation and the war in Ukraine overtook the risks of the coronavirus pandemic. 
• The U.S. central bank, in a surprise move, projected the equivalent of quarter-percentage-point rate increases at each of its six remaining policy meetings this year, which would push the target federal funds rate to a range between 1.75% to 2.00% by the end of 2022. By the end of next year, the policy rate is projected to be 2.80%, above the 2.40% level officials now feel would slow the economy.
• A slowdown, however, may already be underway. Fed policymakers marked down their economic growth estimate for 2022 to 2.8%, from the 4.0% projected in December, as they began to discount the new risks facing the global economy. 
• The Fed noted that the invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain, but in the near term, the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity. 
• The interest rate path shown in new projections by policymakers is tougher than expected, reflecting Fed concern about inflation that has moved faster and threatened to become more persistent than expected, and put at risk the central bank's hope for an easy shift out of the emergency policies put in place to fight the fallout from the pandemic. 
• Even with the tougher rate increases now projected, the Fed expects inflation to stay above its 2% target, remaining at 4.1% through this year and dropping only to 2.3% through 2024. The unemployment rate is seen dropping to 3.5% this year and remaining there next year but is projected to rise slightly to 3.6% in 2024.

(Source: Reuters)

• Oil lost ground for the fifth time in the last six days on Wednesday as traders reacted to hoped-for progress in Russia-Ukraine peace talks and a surprising increase in U.S. inventories. The oil market has been on a roller-coaster for more than two weeks, and both major benchmarks have traded in their largest high-to-low range over the last 30 days than at any time since the middle of 2020. 
• Wednesday was no different, as global benchmark Brent traded in a $6 range, between $97.55 and $103.70 before settling at $98.02, down $1.89 a barrel, or 1.9%. U.S. West Texas Intermediate (WTI) crude ended down $1.40, or 1.5%, at $95.04 a barrel. 
• Last week's frenzied rally pushed Brent briefly past $139 a barrel on worries about extended disruption to Russian supply. Brent is now more than $40 below that point, and some analysts have warned that this reflects too much optimism that the war will end soon. 
• The United States and other nations have slapped heavy sanctions on Russia since it invaded Ukraine more than two weeks ago. This disrupted Russia's oil trade of more than 4 to 5 million barrels of crude daily. 
• Should the war continue, more supply will be disrupted, the International Energy Agency (IEA) said Wednesday. Three million barrels per day of Russian oil and products may not find their way to market beginning in April, the IEA said, as sanctions bite and buyers hold off. The IEA also said demand will fall, but not by as much as the potential drop in Russian supplies.

(Source: Reuters)

• For February, the All-Jamaica Consumer Price Index (CPI) increased by 0.8% up from 0.6% in January and in line with the 0.8% outturn in December 2021. February’s outturn meant that point-to-point inflation was 10.7% in the 12 months to February 2022, up from the 9.7% reported in January 2022. February’s outturn puts inflation firmly outside the BOJ’s target range of 4% to 6%, for the 7^th consecutive month. 
• A 1.3% increase in the index for the ‘Food and Non-Alcoholic Beverages’ division was the main driver of the rise in consumer prices. The prices for Meat and other parts of slaughtered land animals increased due to the rise in the prices for chicken products. Also contributing to the upward movement in the division was the 1.0% increase in the index for the class ‘Vegetables, tubers, plantains, cooking bananas and pulses’, as prices increased for some vegetables.  
• The elevated inflation rate will continue to be driven by the transmission of higher international commodity and shipping prices to domestic processed food, food-related services and energy and fuel prices, as well as a recovery in domestic demand. The geopolitical tensions between Russia and Ukraine in March have adversely affected oil, gas, and grain prices, which poses a risk to both global and domestic growth and will likely fuel further price increases in March. Moreover, a renewed spike in COVID-19 cases in China is likely to further exacerbate supply chain woes.  
• The BOJ has already increased its policy rate to 4.00% and may increase it further at its next policy decision meeting scheduled for March 29^th. Apart from the higher inflation rates, this decision is likely to also be driven by the higher inflation expectations. Inflation expectations for 12 months ahead rose to 9.1% in the December Survey from 8.9% in the prior survey.

(Source: STATIN and NCBCM Research)

• The Chilean budget deficit is expected to narrow to 4.1% in 2022, from 10.0% in 2021, as the government pares back pandemic-era stimulus payments. 
• The government had enacted a stimulus package equivalent to 14.1% of GDP at the beginning of the COVID-19 pandemic; however, as case numbers decline it will reduce these measures in 2022. That being said, the pace of consolidation will be tempered by weaker economic growth which will weigh on revenues. 
• Moreover, while the fiscal deficit will continue to shrink in 2023 and 2024, Fitch expects that it will remain wider compared to the historical pre-crisis average as President-elect Gabriel Boric enacts an expansive spending plan in accordance with his campaign promises of mitigating inequality and promoting social transformation.  
• While the 2022 budget includes substantial spending cutbacks, expenditures will remain above the country’s historic trend as public investment and health spending increase. That said, revenue receipts will grow by just 1.3% in 2022, after surging 24.3% in 2021, as economic growth slows, dampening the pace of fiscal narrowing.  
• Fitch forecasts that GDP growth in Chile will slow to 2.2% in 2022, as withdrawn stimulus dampens goods consumption in the quarters ahead. While higher production levels in the mining sector will generate stronger revenue inflows from that channel over the coming quarters, (grew 246.2% y-o-y in the year through August 2021), the economy's overall deceleration is expected to negatively impact income and value-added taxes, which accounted for 38.7% of total revenue receipts in 2019.

 (Fitch Solutions)

• The invasion of Ukraine by Russia has increased oil prices on the international market, which experts say will have a domino effect on economies and there will be no exception for Antigua and Barbuda.  
• Just as Antigua and Barbuda’s economy is starting to recover from the devastating fallout from the COVID-19 pandemic, the nation is about to be dealt another blow as a result of the rise in gas prices. This will spill over into the tourism sector further stymieing the already struggling sector thereby, reversing the gains made in the sector when airlines and other stakeholders are forced to increase their fares. 
• Over the weekend, Prime Minister Gaston Browne said his government can no longer maintain the subsidised EC $12.50 per gallon gas price across the country, saying that the prices of gasoline and diesel will be more than $15 per gallon and that residents could begin realising the increase at the pumps in a matter of days. 
• The Russia-Ukraine conflict will continue to have adverse effects on the local economy not only through increased oil prices but also through higher inflation and surges in prices of other commodities such as wheat and corn. This will inadvertently, lead to higher electricity and gas prices for both consumers and producers alike. These increases will continue to stifle growth in Antigua and Barbuda, as the country continues to recover from the effects of the ongoing pandemic.

 (Source: The Daily Observer)

• Oil prices tumbled more than 6% to their lowest in almost three weeks on Tuesday as supply disruption fears eased and surging COVID-19 cases in China spurred demand concerns. 
• Brent futures fell $6.66, or 6.2%, to $100.24 a barrel by 2:01 p.m. EDT (1801 GMT), while U.S. West Texas Intermediate (WTI) crude fell $6.42, or 6.2%, to $96.59 a barrel. Brent fell as low as $97.44 and WTI hit $93.53, their lowest since Feb. 25. 
• Both contracts moved the closest to oversold territory since December. They had been in overbought conditions as recently as early March when the benchmarks reached 14-year highs after Russia invaded Ukraine. Since then, Brent has lost nearly $40 and WTI has fallen by more than $30. 
• The steep decline on Tuesday followed a statement from Russian Foreign Minister Sergei Lavrov, saying Moscow is in favour of the 2015 Iran nuclear deal resuming as soon as possible.
• The talks to revive the nuclear accord, which would lead to sanctions on Iran's oil sector being lifted and allow Tehran to resume crude exports, had recently stalled because of Russian demands. At the same time, a Ukrainian negotiator on Tuesday said talks with Russia over a ceasefire and withdrawal of Russian troops from Ukraine are ongoing. Russian Foreign Minister Sergei Lavrov unexpectedly demanded sweeping guarantees that Russian trade with Iran would not be affected by sanctions imposed on Moscow over its invasion of Ukraine - a demand Western powers say is unacceptable and Washington has insisted it will not agree to. 
• Further adding price pressure, China saw a steep jump in daily COVID-19 infections, raising renewed worries about the recovery from the coronavirus pandemic.

(Source: Reuters)

• Another surge in energy prices pushed wholesale goods prices to their biggest one-month jump on record in February, according to Labour Department data released Tuesday. Final demand prices for goods jumped 2.4% for the month, the largest move ever in data going back to December 2009, the Bureau of Labour Statistics said. 
• That pushed the headline producer price index up 0.8% on the month, which was slightly lower than the 0.9% Dow Jones estimate. Excluding food, energy and trade services, the so-called core PPI rose just 0.2%, well below the 0.6% expectation. 
• On a year-over-year basis, headline PPI rose 10%, the same as January and tied for the biggest 12-month move ever. The data came during the week of Feb. 13, before the Russian invasion of Ukraine. Energy prices surged even more as the war began, and will show up in next month’s report. 
• The numbers coincide with most other inflation gauges running around 40-year highs, thanks to price increases that have spread beyond volatile gas and grocery prices and across a broad spectrum of consumer goods and services. In response to the inflation trend, the Federal Reserve is expected on Wednesday to raise interest rates for the first time since December 2018. 
• Gasoline was still the main story in February when it came to final demand prices. Some 40% of the increase in wholesale goods prices came from gasoline, which rose 14.8%. Diesel fuel and electric power also helped feed an 8.2% increase in final demand energy prices, while motor vehicles and equipment and dairy prices also climbed. Various prices for food products, such as fresh and dry vegetables along with beef and veal showed declines.

(Source: CNBC News)

• The Government is making a special provision, in the amount of $2 billion, to provide targeted support to Jamaicans who are most adversely affected and have the least ability to absorb the impact of high gas and energy prices. 
• Though discussions are in their initial phases, the provision is expected to target key stakeholders such as taxi operators, who have fixed fares, as well as children on the Programme of Advancement Through Health and Education (PATH), who have transportation costs. 
• Additionally, the government has a long term strategy to reduce Jamaica’s dependence on petroleum. Given that majority of Jamaica’s import bill is for petroleum used by cars, the government intends to provide incentives to promote the use of Electric Vehicles, which is a cheaper alternative. 
• This incentive will come in the form of reduced import duty from 30% to 10%, for an initial five-year period. The measure will be executed in the first quarter of the financial year 2022/2023. 
• As the government combats gas and energy prices by incentivizing Electric Vehicle purchases, petroleum retailers may see a gradual demand reduction.

(Source: JIS and NCBCM Research)

• The Government is making a special provision, in the amount of $2 billion, to provide targeted support to Jamaicans who are most adversely affected and have the least ability to absorb the impact of high gas and energy prices. 
• Though discussions are in their initial phases, the provision is expected to target key stakeholders such as taxi operators, who have fixed fares, as well as children on the Programme of Advancement Through Health and Education (PATH), who have transportation costs. 
• Additionally, the government has a long term strategy to reduce Jamaica’s dependence on petroleum. Given that majority of Jamaica’s import bill is for petroleum used by cars, the government intends to provide incentives to promote the use of Electric Vehicles, which is a cheaper alternative. 
• This incentive will come in the form of reduced import duty from 30% to 10%, for an initial five-year period. The measure will be executed in the first quarter of the financial year 2022/2023. 
• As the government combats gas and energy prices by incentivizing Electric Vehicle purchases, petroleum retailers may see a gradual demand reduction.

(Source: JIS and NCBCM Research)

• Dominica has suspended, with immediate effect, applications from nationals of Russia and Belarus seeking citizenship under the island’s Citizenship by Investment Program (CBI) that caters to large foreign investors. 
• Dominica’s position to suspend nationals from Belarus and Russia from the CBI program follows Moscow’s invasion of Ukraine and the United Nations General Assembly (UNGA) decision to condemn Moscow for its action. This measure is to safeguard the Dominica community and the integrity of the Dominica Citizenship by Investment Program. 
• In 2020, Prime Minister Roosevelt Skerrit told Parliament that the CBI had earned Dominica EC$1.2 billion (One EC dollar=US$0.37 cents) over the last three years, and for the fiscal period 2017-2020, and 5,814 applications had been approved. 
• To qualify for the CBI, the investment made by foreigners is expected to be large enough to positively impact the island’s socio-economic conditions. The approved CBI residents, up to 2020, totalled around eight per cent of the Dominican population.
• Notably, in March last year, Skerrit said his administration had been utilizing the CBI funds to pay off debts, meet the current expenditure of the government, and sustain ongoing projects in the public sector.

 (Caribbean National Weekly)