The day at a glance | December 31, 2021

The Top

*AMLO wishes Banxico would back growth, but he reiterated that he will respect the central bank`s independence.

*The European Central Bank could start the rise in interest rates in 2023, according to Klass Knot, member of the Governing Board.

*Manufacturing activities in China accelerate during December (Manuf. PMI 50.3).

*Moscow considered conversations about Ukraine with Washington satisfactory; they will maintain contact to avoid an increase in tensions. 

*Inflation in South Korea exceeded 3% for a third consecutive month (3.7% annual, Dec.).

*Mergers and acquisitions at a global level reached a record 5 trillion dollars in 2021.

 

Economic environment

Rodríguez Ceja is committed to Banxico`s inflation-targeting mandate. During a press conference held yesterday morning, President Andrés Manuel López Obrador pointed out that he would like to see the Central Bank of Mexico contribute to greater growth in the economy; even though this is only his opinion and he will respect the decisions Banxico makes. His comments were made just before the central bank`s new Director, Victoria Rodríguez Ceja, takes over tomorrow. Obrador assured that inflation can be controlled, however, there will be no progress if there is no economic growth. Nevertheless, Rodríguez Ceja reiterated her commitment to Banxico`s inflation-targeting mandate, which seeks to keep inflation low and stable. There is uncertainty revolving around the possibility that the central bank`s new director will lean towards the administration`s agenda, making growth a priority, steering away from its independence and the central bank`s inflationary target. The first monetary policy decisions made in 2022 will determine if there are any changes related to the Governing Board`s priorities. However, markets will leave no room for doubt: Banxico is still expected to continue with the increasing cycle of interest rates in order to control inflation, with the most recent short-term government debt auctions pointing towards rates above 6.75% for the next 12 months, 125 base points above the current level (5.5%).