The Day at a Glance | April 19 2023

*James Bullard, President of the St. Louis FED maintains a restrictive stance. 

*The number of mortgage applications in the US decreased -8.8% the week ending April 14th from a previous 5.3%, according to the Mortgage Bankers Association. 

*The Federal Reserve will make its beige book public at 12:00pm Mexico City time, which is a qualitative revision of economic conditions. 

*The Ministry of Finance and Public Credit (SHCP for its initials in Spanish) will carry out a Udibono exchange on April 24th. Udibonos turned in by bidders include 5 periods with deadlines between Nov ´23 and Nov ´40 in exchange for the Udibono with November 2043 as deadline. 

Economic environment

In an interview, President of the St. Louis FED, James Bullard, stated that he considers that the terminal rate should set at between 5.50% and 5.75%. This stance is based on the fact that although inflation is slowing down, it hasn´t done so as fast as the central bank wants it to converge to its 2% target. In addition, he added that the labor market seems “…very, very strong. And the conventional wisdom is that if you have a strong labor market that feeds into strong consumption…and that´s a big chunk of the economy… it doesn’t seem like the moment to be predicting that you have a recession in the second half of 2023”. With this, his comments during the interview seem to differ with the idea of a recession occurring towards the end of the year due to disruptions in the North American banking sector. If it be the case, this would be shown in data such as the St. Louis FED´s financial stress indicator; however, this indicator stands at zero.