The Day at a Glance | April 8 2021

The Top

*Inflation in Mexico accelerates to an annual rate of 4.67% during March.

*FED once again stated in its meeting minutes that it will take time before withdrawing stimuli.

*ECB meeting minutes confirm that risks to growth in the region have decreased in the medium-term.

*Spain will decrease growth estimates for 2021 after recording a slow start to the year.

*Economic indicators: Jobless claims in the US surprise to the upside (744 thousand vs 680 thousand e.).

Economic environment

The Consumer Price Index in Mexico accelerated to a 4.67% annual rate during March, boosted by energy prices, agricultural goods, commodities and a low base comparison (2020). Inflation increased 0.83% during the month and the non-underlying component (the more volatile component) once again led the increases in the economy`s prices with a 2.75% monthly rise in energy resources and a 1.27% increase in agricultural goods. Underlying inflation, for its part, increased 0.54% monthly (vs 0.52% e.) and set at 4.12% annual. This is the greatest level of general inflation since the end of 2018, even though the rebound was expected (4.67% e.), and in large part, responds to a low base comparison as the virus caused a rare drop in prices during 2020. Nevertheless, the second greatest monthly rise in the last 12 months was recorded in the Consumer Price Index during March, with a sensitive upsurge in the underlying component (commodities 0.6%; services 0.47%), which suggests that inflationary pressures could be more persistent than initially expected.

The Federal Reserve reaffirmed its accommodative monetary stance after making its most recent monetary meeting minutes public (March 16-17). A discussion between two members revealed that there is a consensus among the FED`s members to maintain an expansive monetary policy, which will not be changed in 2021. Most members consider that it will take time for substantial progress in employment and inflation targets to be reached, which is why they estimate that the asset purchasing program will not undergo any modifications in the near future and will possibly not be reduced until 2022, while the interest rate will remain close to zero until 2023. However, there is greater confidence among the FED`s members concerning the growth outlook (due to fiscal stimuli and vaccine programs), and it`s possible that their concerns in the following months will revolve around defining an exit strategy in order to gradually withdraw stimuli without dramatically affecting financial conditions and markets. Lastly, the members once again dismissed the rises in the market`s long term interest rates by considering them a reflection of greater confidence in future growth; even though some members made a reference to concerns of inflation felt among investors, as well as an oversupply on behalf of the Treasury.