The Day at a Glance | May 24 2023

*Inflation in Mexico logged a positive surprise during the first half of May. 

*In the US, new home sales set at 683,000 in April, which implies a monthly 4.1% increase. 

*Negotiations on the debt ceiling in the US resume this Wednesday with Republicans and the White House seeking an agreement one week before a possible default scenario. One of the Republican negotiators commented on Tuesday that there is still a significant gap between both parties. 

*Today at noon, the Federal Reserve`s meeting minutes will be made known; investors will stay focused on the central bank`s statement. 

*Inflation in the United Kingdom decreased less than expected and put significant pressure on the Bank of England. 

Economic environment

General inflation set at 6.00% in the first half of May, below the 6.13% y/y expected by analysts. On a biweekly basis, consumer prices decreased -0.32% (compared to -0.20% q/q expected). Breaking this figure down, underlying prices increased 0.18% q/q (compared to 0.21% q/q expected), with increases in goods (0.17%) and services (0.19%). On the non-underlying side, the variation set at -1.85% q/q, which is explained by declines in energy prices and government authorized tariffs (-2.99% q/q) and agricultural prices (-0.52% q/q). With this, on an annual basis, underlying inflation logged a 7.45% reading (compared to the expected 7.49% y/y), while the non-underlying inflation component increased 1.70% y/y. The positive surprise in inflation in the first half of May supports the Central Bank of Mexico`s recently taken stance that additional increases are not necessary as a disinflationary process has begun. However, the latest reading shows that it remains double the inflationary target rate (3%); this is why we consider that the reference rate will be maintained at its current level throughout the rest of 2023.