The Day at a Glance | May 12 2022

The Top

*Central Bank of Mexico decision.

*Interest rate in Europe will probably be positive at the start of 2023: Gabriel Makhlouf, member of the ECB.

*Inflation for producers in the US slowed down to an annual 11% during April.

*OPEC cuts its demand for oil estimates for 2022 as a result of the war in Ukraine and COVID-19 restrictions.

*The British economy surprisingly contracted during March (-0.1%) and showed signs that inflation has started to slow consumption.

*Safety bonds and currencies increase in light of concerns of slower global growth.

Economic environment

Decision in the Central Bank of Mexico. This afternoon, the Central Bank of Mexico will make a monetary policy decision. The bank is expected to increase the interest rate in 50 base points to take it from 6.5% to 7.0%, which would be the fourth consecutive 0.5% increase. Banxico will release a statement of its decision at 1:00pm Mexico City time – along with inflationary estimates, which could be revised upwards as April´s figures confirmed that prices continued to increase. The Bank of Mexico faces challenges to contain inflation, which has not showed signs of slowing down, especially regarding the underlying component. Additionally, it must deal with potential risks of capital outflows and the peso´s depreciation (which will eventually translate into inflation) as US interest rates increase and the Federal Reserve maintains an aggressive stance in order to contain inflation in the world´s largest economy. With this, Banxico will very likely increase interest rates aggressively in today´s meeting and continue its restrictive monetary policy until inflation converges with its target level. The interest rate is expected to set at between 8.25% and 8.75% at the end of 2022.