The Day at a Glance | June 10 2021

The Top

*Inflation in the US once again exceeds estimates in May.

*ECB is committed to speed up the rate of its asset purchases to ensure a recovery in Europe.

*Arturo Herrera will be nominated as Governor of the Central Bank of Mexico; Rogelio Ramírez de la O will take charge of the SHCP.

*US and Chinese trade ministers agree to deepen the cooperation in trade and investment, a positive turn in the bilateral relation.

*Economic indicators: Jobless claims in the US continue to decrease (376 thousand vs 370 thousand e.).

Economic environment

Inflation in the US once again surprised to the upside in May. The Consumer Price Index in the US accelerated more than estimated during May by recording a monthly acceleration of 0.6% (0.4% e.) and 5% annual (4.7% e.). Underlying inflation also exceeded estimates for a second consecutive month and logged a 0.7% monthly rise (0.4% e.) and 3.8% annually (3.4% e.). Within the index, all components recorded an increase – except for energy resources (-0.6%) and medical services (-0.1%), while most of the rises were seen in used automobiles (7.3%), transportation services (1.5%) and apparel (1.2%). The data once again confirmed a recovery in prices among activities that were most affected by the pandemic, like those related to transportation, hospitality and car rentals. This maintains the expectation that the surprising increase responds to the economy`s reopening – and not factors that will permanently boost a rise in prices; even though it`s important that these inflationary pressures log moderation in the following months.

The European Central Bank held a monetary policy meeting. This morning, the ECB issued a monetary policy press release in which it committed itself to accelerate the rate of its financial asset purchases in its quantitative easing program in the following months. The ECB seeks to accelerate the rate of purchases “significantly” in the next quarter – compared to what was observed at the beginning of the year. The decision intends to avoid a rise in long term interest rates and the cost of credit as the economic recovery develops. With this, the ECB is committed to maintain stimuli and reinforce the message that the economy still needs aid. Out of the 1.85 trillion euros available in the quantitative easing program, the ECB had been carrying out purchases of 14 billion euros every week until March, when it increased the rate to 19 billion. A larger increase is expected in the months to come and a withdrawal of stimuli is not expected to occur until September of this year. The emergency program will stay in place until March 2022; markets don`t expect this to be extended for a longer period of time. The ECB increased its growth estimates for 2021 to 4.6% (4% prev.) and 1.9% for inflation (1.4% prev.).