The Day at a Glance | December 1 2022

*Powell confirmed more moderate interest rate increases starting in December.

*Inflation (PCE) in the United States increased less than expected in October (0.3% m/m; 6% annual).

*China allows people infected with COVID-19 to isolate at home; another lighter restriction regarding the pandemic.

*Germans cut spending in light of increased prices: Reuters.

*Global industrial activity receded in November, but price pressures decreased.

*Banxico increased its growth estimate to 3% for 2022.

*The US manufacturing ISM will be made known today (49.8e.).

Economic environment

Dovish. In an event held at the Brookings Institution in Washington, Chair of the Federal Reserve, Jerome Powell, confirmed that interest rate increases will be more moderate as soon as the central bank´s next meeting, which is scheduled to take place in December. Powell assured that they are now more concerned about how high the interest rate will have to be increased to – rather than how fast the rate is being increased; in addition to how long a restrictive monetary policy must be carried out. Comments were well received by markets as they pave the road towards a less aggressive FED and now a 50bp increase is expected to be carried out on December 14^th. Moreover, Powell considered that avoiding a recession can still be done, even despite the aggressive adjustment in financial conditions. He also considered that more moderate interest rate increases will give them more room for maneuver and allow monetary policy risks to be balanced – containing inflation while avoiding a recession. However, he reiterated that the FED still has a lot to do to contain inflation and must continue increasing interest rates in its next meetings and it´s likely that rates will remain high for a long period of time. He acknowledged that the greatest risk is not doing enough and that they need more clear evidence of a decrease in inflation. He sustained that the inflationary outlook is still uncertain and acknowledged that more structural inflationary pressures prevail, especially ones coming from wage increases. Despite an economic slowdown and a restrictive monetary policy, Powell assured that clear progress regarding inflation still can´t be seen.