The Day at a Glance | November 29 2022

*Members of the FED reiterate the need to continue with the increasing rates cycle.

*China will double its COVID vaccine efforts among senior citizens, which is key for the economy´s reopening.

*Inflation in Spain decreased more than expected in November (6.6% annual vs 7.5%e.); inflation stabilized at 11.3% in Germany.

*Unemployment in Mexico set at 3.2% in October.

*European economic sentiment rebounded more than expected in November.

*Missile alarms in Ukraine have not rested as NATO promises aid.

*November´s official PMI´s will be made public in China tonight; forecasts expect a contraction in manufacturing and services.

Economic environment

Members of the FED. In their most recent public comments, members of the United States Federal Reserve reiterated messages that the increasing rates cycle must continue despite it having a slower pace. John Williams, President of the New York FED, assured that rates will reach higher levels than expected in September (4.6%), given the strength seen in the economy, the labor market, and underlying inflation that remains high. James Bullard, of the St. Louis FED, said that markets are underestimating interest rate increases necessary to contain inflation. He affirmed that risks are skewed towards the FED having to be more aggressive to contain inflationary pressures. Lastly, Thomas Barkin, of the Richmond FED, reiterated that the rates´ ceiling could be higher than expected and it will have to remain high for prices to cool down to more acceptable levels. Members of the FED will meet on December 13th-14th and will make a monetary policy decision. The Open Market Committee is expected to announce a 50bp increase, the most moderate since mid-2022 as a more cautious stance is being carried out in order to assess rate impacts on the economy, inflation, and financial stability. New macroeconomic forecasts will also be made known – members will point out the new expected level interest rates will reach. Markets expect them to reach 5%-5.5% through the start of 2023, and will then start to decrease in September of 2023 since a recession is expected to occur in the second half of 2023 in the United States. John Williams (NY FED) assured that he doesn’t expect interest rates to decrease until 2024, in line with inflation, and will do so moderately. Meanwhile, Loretta Mester (Cleveland FED) revealed in an interview with the Financial Times that she doesn’t believe that the end of the increasing rates cycle is near, which is why market expectations of there being a pause halfway through 2023 are not accurate.

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