The Day at a Glance | June 16 2021

The Top

*FED will make a monetary policy decision today (1:00 pm Mexico City time) and reveal new macroeconomic estimates.

*Growth in China stabilizes during May.

*S&P ratified Mexico`s credit rating of BBB with a negative outlook; it reiterated the risk of decreasing its rating in the next 12 months.

*China announced that it will release copper, aluminum and zinc reserves to decrease upwards pressures on metal prices; it called for state companies to reduce their exposure to international raw material markets.

Economic environment

The Federal Reserve will make a monetary policy decision. This afternoon, the US Federal Reserve`s new monetary policy decision will be made public in a press release. No relevant changes are expected to be made regarding its monetary stance, which is why interest rates will likely remain in the 0%-0.25% range and the asset purchasing program will continue to be carried out at a pace of 120 billion dollars a month. However, new growth, inflation and interest rate estimates will be made public – and markets will look for signs of any future monetary normalization. A larger consensus among the FED`s members is expected to point out that the first rise in interest rates will occur starting in 2023. Additionally, markets will stay focused on any reference made to the withdrawal of stimuli through the reduction of its asset purchasing program. The weakness seen in employment data in recent months and the FED`s stance on inflation being temporary could postpone any conversations on the withdrawal of stimuli until after the summer, although the issue will focus on Jerome Powell`s press conference. Markets expect the asset purchasing program to start being reduced at the start of 2022 or even at the end of 2021.

China showed signs of stabilization during May. Growth in the world`s second largest economy continued to moderate during May and showed a gradual re-balancing among its growth drivers. China logged a strong recovery after the pandemic, boosted by industrial production exports and a boom in construction backed by government stimuli. This growth driver has started to become more moderate and is giving way to a gradual expansion that is led by consumption, which had been lagging. The most recent growth data regarding China`s economy shows that the transition is still in process, which results in a stabilization and a moderation in rates of growth. Industrial production increased 8.8% annually during May, while the components that make up demand, such as consumption (retail sales 12.4% annual) and fixed investment (15.4%) showed a faster rate of growth. Compared to April, there were few changes regarding the rate of growth, which suggests that there is stabilization in China`s economy. Domestic demand still remains under its pre-pandemic levels and China still has enough space to continue growing, although expansion is expected to be gradual. Consumers are still cautious despite the fact that there have not been any concerning outbreaks of the virus in the country; the slow recovery in employment and low levels of income seem to continue limiting the recovery in consumption.