The Day at a Glance | Jun 7 2022

 The Top 

* Markets take a 50bp increase into account with a 50% probability in July on behalf of the ECB. 

* The United States announces private investment worth 2 billion dollars in Central America during this week´s Summit of the Americas. 

*Semiconductor prices decrease; fertilizer and container prices suggest moderation in inflation. 

* Putin acknowledged there is a strong slowdown in some of Russia´s industrial sectors as Western sanctions take effect. PRD could lose 4 of 6 states where elections took place this weekend; PRI could lose Quintana Roo. 

* Ministry of Health will resume daily COVID-19 reports in light of an increase in cases. 

Economic environment 

Monetary normalization in Europe. Europe´s money market has started to take into account a 50bp increase in interest rates in July on behalf of the European Central Bank with higher probability (50%). If the aggressive increase does occur, this would be the ECB´s first movement of this magnitude since 2000. Markets are taking into account a rate 37.5bp above its current level (-0.5%) in July, and 134bp by the end of the year. However, most of the ECB´s members have reiterated that they back a more gradual monetary normalization process, discarding increases above 25 base points in every meeting. However, they are facing record high inflationary pressures: In May, inflation reached 8.1% annual, more than 4 times the ECB´s target level. Only Robert Holzmann (Central Bank of Austria) recognized that high inflation has increased the likelihood of a more aggressive monetary normalization progression. The bank will hold a meeting on Thursday and make a monetary policy decision; it´s also expected to announce the end of the purchasing program and send clear signs of the beginning of an increasing rates cycle starting in July. Along with the decision, the ECB will make its new macroeconomic forecasts public, which will be greatly important to clarify the future of Europe´s monetary policy.