The Day at a Glance | May 13 2021

The Top

*The Central Bank of Mexico will carry out a monetary policy decision today (4% e.; 1:00 pm Mexico City time).

*Despite the surprising rate of inflation seen in April, we continue to consider that the rise is temporary: Richard Clarida, Vice-President of the FED.

*UN shows concern regarding tensions in Gaza; the risk of an armed conflict is high.

*Economic indicators: Jobless claims continue to descend in the US (553 thousand); inflation for producers doubles estimates in the United States (0.6% m/m vs 0.3% e.; 6.2% annual vs 5.9% e. Apr.).

Economic environment

The Central Bank of Mexico will hold a monetary policy meeting today. Banxico will make a monetary policy decision today at 1:00 pm Mexico City time. The bank is expected to keep the interest rate target at 4%. Any reference to the impact of recent surprises seen in inflation on its monetary policy stance will be greatly important for market players. General inflation reached 6.08% annual during April, its highest level since 2017, in good measure due to the arithmetic effect one year after the start of the pandemic. However, the rebound has been greater than initially estimated and Banxico could show a more cautious tone with respect to past statements. Some of the Governing Board`s members considered in past meetings that the rise in prices would be temporary and that there would be enough room to continue decreasing interest rates in the future, however, the recent changes in inflationary risks at a global level along with an acceleration in domestic prices as the economy reopens could force plans to be changed. The analysts` consensus expects the interest rate to remain at 4% throughout 2021 and to gradually increase in the second half of 2022. Nevertheless, some still expect to see the interest rate to be cut towards the end of the year; while others have started to forecast a rise in the rate towards the end of 2021 or beginning of 2022.