The Day at a Glance | Jul 13 2022

The Top

*Inflation in the US reached an annual 9.1% in June.

*China`s trade balance logged a record in June after an increase in exports (18% annual) and the end of confinement measures.

*IMF cut its growth expectation for the United States to 2.3% for 2022 due to inflationary risks; it warns that avoiding a recession will be difficult.

*G-20 finance ministers and central bankers are meeting in Bali to discuss inflation, oil, debt and currencies.

*Kristalina Georgieva, Director of the IMF, warned about the risks of a global debt crisis as interest rates are increased.

*The People`s Bank of China considers there is ample liquidity in the economy, discards cutting interest rates.

Economic environment

Inflation surprised to the upside in the United States. The United States` Consumer Price index surprised by logging a 1.3% monthly increase in June, exceeding estimates (1.1%e.) and reached a 9.1% annual rate, a new record level in the last 40 years. Such high inflationary rates had not been seen since November of 1981. The largest increases were logged among energy prices (7.5% monthly; gasolines 11.2%), while food prices maintained a constant increase with respect to previous months (1%). Underlying inflation logged a 0.7% increase, the largest in at least 7 months, and at an annual rate, it slowed down moderately to 5.9% (vs 5.7%e.). Commodity prices continued logging high rates of inflation (0.8% monthly), mainly boosted by used automobile prices (1.6%). Concerning services, transportation prices logged a 2.1% monthly increase  (the second largest increase so far this year), while housing prices maintained a constant pace of growth (0.6%). The data confirms that the FED will continue carrying out aggressive interest rate increases, with a high likelihood of seeing a 75bp hike in July. Throughout the day, it`s possible that markets will increase their expectations of interest rates being increased in future meeting, given the inflationary surprise and the visible pressures seen in the underlying component. The dollar appreciated after the news.