The Day at a Glance | November 11 2021

The Top

*Bank of Mexico will make a monetary policy decision this afternoon.

*Industrial activity in Mexico receded during September (-1.4% monthly; +1.7% annual).

*All of the ECB`s asset purchases could come to an end next fall: Robert Holzmann, member of the ECB.

*Evergrande avoids default with interest payments on debt.

*The European Commission forecasts inflation below the ECB`s target for 2023 (2.4% 2021; 2.2% 2022; 1.4% 2023).

*North American companies are opting for the automation of production chains in light of growing demand and scarcity of labor: Reuters.

Economic environment

Banxico is expected to increase interest rates. This afternoon (1:00 pm Mexico City time), the Central Bank of Mexico`s Governing Board will have a monetary policy meeting. The bank is expected to increase the target interest rate in 25 base points to set it at 5% after inflationary surprises persisted during October. It`s possible that the decision could be made unanimously for the first time since June as local and global inflationary risks continue to materialize. Inflation in Mexico accelerated to 6.24% last month and is not expected to decrease until the start of 2022; some analysts even forecast inflation will reach 7% before receding. These circumstances point to the bank`s need of having to shift towards an almost neutral monetary stance by the end of 2021 and slightly restrictive during 2022 (6.5%e. 2022) as inflation is not expected to set at the central bank`s target rate until 2023. According to a survey carried out by Bloomberg, 8 of 26 surveyed economists expect interest rates to increase even more (50 base points); even though most consider that a 25 base points increase is appropriate since monetary policy can only do so much for problems regarding supply that have been triggered by inflationary pressures; additionally, aggressive increases could weaken the economic recovery.