The Day at a Glance | August 21 2023

*The People’s Bank of China (PBoC) lowers its 1-year loan prime rate to a historic low. 

*Banxico will carry out an extraordinary auction for monetary regulation purposes this Wednesday, August 23rd. The instruments to be auctioned will include Cetes with maturities between 154 and 686 days, as well as Bondes F with maturities between 357 and 1,757 days. 

*Former U.S. President, Donald Trump, announced on Sunday that he will not participate in the first primary presidential debate of the Republican Party, which will take place this Wednesday in Milwaukee. He argued that people already know who he is, so he will not be participating in the debates. Instead, according to CNN, Trump will have an interview with Tucker Carlson.

Economic environment

The People’s Bank of China (PBoC) cut its 1-year loan prime rate by 10 basis points to reach a historic low of 3.45%. This is another attempt to stimulate demand for credit. However, it´s surprising that they kept the 5-year rate unchanged (4.2%) amid concerns about the rapid weakening of the renminbi. The announcement made on Sunday night (Mexico City time) was preceded by the central bank’s surprising decision to decrease short and medium-term rates last week in order to boost China´s economy. These events occurred amidst consistent promises from the PBoC to inject more liquidity into an economy that has been logging a slowdown in its commercial activity, coupled with a downward trend in prices, fueling deflationary forecasts. As a result, Prime Minister Li Qiang pointed out that achieving a 5.0% growth target this year is not optional, highlighting the need to expand domestic demand and attract foreign investment.

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