The Day at a Glance | March 16 2023

*As expected, today the European Central Bank rose by 50 bps the Eurozone interest rate.

*US jobless claims reduced to 192k on March 11th week, below the 205k estimated and 211k from the previous week.

*US single-family housing starts in February registered a 5-month high at 1.45 million (+9.8% m/m), beating the consensus of 1.31 million.

*Similarly, approved building permits reported its biggest figure since September with 1.52 million in February (+13.8% m/m), the largest expansion since July 2020.

*The Philadelphia FED Manufacturing Index registered its seventh consecutive negative reading, standing at -23.2 pts in March, slightly higher than -24.3 from February, but still denoting a significant deterioration in the US Northeast manufacturing sector. We highlight that the report informed a decrease in employment, which could partially release pressures in the labor market and, therefore, in the FED.

*The US military released footage of a Russian fighter jet forcing down an American drone after the Russian Defense Ministry denied it. Russia commented that Moscow-Washington relations are at their lowest right now. 

Economic environment

This morning the European Central Bank (ECB) rose 50 bps the Eurozone interest rate, by locating the deposits rate at 3.0%. The decision to keep the hawkish cycle going comes from the perspective that inflation is a higher immediate risk to the economy than the current banking sector turmoil, because “inflation is projected to remain too high for too long”, pressured by the core. In this way, inflation estimates of the ECB consider a 5.3% average level in 2023, 2.9% in 2024, and 2.1% in 2025. The statement showed that the Governing Council is monitoring the current market tensions and “stands ready to respond as necessary to preserve price stability and financial stability in the euro area”. They added that “the euro area banking sector is resilient, with strong capital and liquidity positions”, and if needed “the ECB’s toolkit is fully equipped to provide liquidity support to the euro area financial system… and to preserve the smooth transmission of monetary policy”. Finally, the prospective guidance was minimum in the report, without committing to anything for the next meetings.