The Day at a Glance | March 18 2021

The Top

· The Bank of England held its monetary policy meeting. It left the reference unchanged (0.1%) as well as its asset purchasing program.

· The Bank of Brazil became the world`s first central bank to increase the reference rate yesterday (75 base points).

· Long term interest rates once again increase; the 10-year Treasury Bond reached 1.75% amidst expectations of greater growth.

· Unemployment insurance claims increased to 770 thousand, exceeding estimates.

Economic environment

The Federal Reserve held its monetary policy meeting. It left rates and the asset purchasing program unchanged. Yesterday, the FED decided to maintain its highly accommodative stance. Additionally, it revised its growth estimate upwards from 4.2% to 6.5% for 2021. As for inflation, the central bank now expects it to increase to 2.4% this year and would imply no changes regarding its stance. The rate of unemployment is expected to set at 4.5% at year`s end. According to the dot plot, 7 members now expect interest rates to increase in 2023, compared to only 5 in the previous meeting. This suggests that rates will remain low for the next 18 months. The FED`s ultra-lax stance temporarily eased concerns among investors, however, fears regarding inflation have resurged today with the 10-year Bond reaching 1.75%, its highest level since August of 2019. It seems that markets could be forcing the central bank to halt the Bond`s rate speedy increase.

INEGI published February`s INOE, which points towards a 4% contraction in the economy. The indicator for economic activity in February decreased 4%. Secondary activities receded 4.2% and tertiary activities recorded a 4.3% setback. Nevertheless, an improvement can be observed with respect to the previous month, during which the economy fell 5.5%. The indicator could be a prelude for something significant; this is why it`s important to understand the economy`s overall state, which up to February, continued showing signs of contraction in the first quarter.