The Day at a Glance | April 22 2022

The Top

*Inflation in Mexico once again exceeded estimates in the first half of April (7.72% annual).

*Powell reinforces expectations of aggressive interest rate increases in the United States in order to control inflation in an IMF event.

*Markets consider that the FED will carry out 4 increases (50 bp each) between May and September after Powell`s comments.

*Russian general assured that Moscow`s goal is to control southern Ukraine and the Donbas region; occupation could extend to Moldavia.

*Governor of the People`s Bank of China reiterates caution in implementing new stimulus; the Yuan fell to its lowest level against the dollar in a year.

*Container shipments delayed up to 12 days in the Shanghai port – this has revived production chain disruptions.

Economic environment

Inflation in Mexico increases. The Consumer Price Index once again surprised to the upside in the first half of April and logged its largest annual increase in 20 years. Prices increased 0.16% in the first half of April with respect to the previous biweekly period – figure above the 0.07% expected by analysts. With this, annual inflation set at 7.72%. Meanwhile, underlying inflation increased 0.44% biweekly (vs 0.34%e.) and set at a 7.16% annual rate. The data confirms that there are persistent inflationary pressures, which are mainly focused in the underlying component (commodities and services). Energy resources receded (-) 2.39% in the biweekly period in light of the start of electricity subsidies program during the warm season, a fall that was not offset by a 0.65% biweekly increase in agricultural goods, which led underlying inflation to decrease (-) 0.66% biweekly. However, underlying inflation increased the most and contributed to a positive surprise in inflation; a sign that the rise in prices has become more of a structural problem. Commodity prices increased 0.55% during the two week period (with equal increases in food prices – 0.58%, and non-food prices – 0.5%), while services logged a 0.32% increase (led by tourist services 9.36%; housing 0.1%, and fondas 0.35%). The data reinforces arguments for the Central Bank of Mexico to continue carrying out aggressive interest rate increases to contain the rise in underlying inflation and avoid medium and long-term inflationary expectations from becoming unanchored.