The Day at a Glance | March 14 2023

*Inflation in the US logged its eighth consecutive decrease in February, although upwards pressures remain in place in the core component.  

*President of the US, Joe Biden, stated in a speech on Monday “Americans can rest assured that our banking system is safe”. 

*Russia orchestrated multiple attacks on Ukraine on Tuesday – at least three people died. 

*Mexico´s Foreign Secretary, Marcelo Ebrard, met with Mexican Ambassador in the US, Esteban Moctezuma, and 52 consuls that represent Mexico in the US; they met in efforts to carry out an informative campaign in light of recent attacks on Mexico on behalf of Republican legislators.  

Economic environment

In line with consensus estimates, inflation in the US moderated in February (to 6.0% annual vs 6.4% prev.). On a monthly basis, general inflation recorded a 0.4% change, also lower than January’s 0.5%. This moderation in the increase in prices was due to lower energy prices, which fell -0.6% in February. However, despite the general downwards trend, upward pressure from the underlying component continues, increasing its monthly variation for the third consecutive month as it logged a 0.5% figure, exceeding consensus estimates. This new acceleration is due to higher variation rates in the services prices (excluding energy services), housing, and transportation services. With this, on an annual basis, the underlying component recorded a 5.5% increase, marginally lower than the previous 5.6%. Overall, February´s figures show that inflation will not drop as rapidly as to support new market expectations regarding the FED’s trajectory, which, after the inflation data, consider two-25bp hikes in March and May, implying a terminal rate of 5.25%, followed by three cuts this year; the first of them as early as June, and the other two in July and December. With this, the services sub-index continues causing concern as it´s reluctant to decrease, possibly due to a tight labor market, which should lead interest rates to at least remain in restrictive territory – and not go through cuts amidst a turbulent scene in financial markets.