The Day at a Glance | November 9 2022

The Top

*Inflation in Mexico surprised to the downside in October (8.41% annual).

*Republicans gained ground in midterm elections, but Democrats had better than expected results.

*30-year mortgage rates in the United States reached 7.14%, their highest level since 2001; mortgage applications decreased to their lowest levels since 1997.

*Cryptocurrencies linked 2 consecutive days of strong drops; investors fear instability in the sector.

*Long term inflationary expectations remains stable: John Williams, NY FED.

*Eastern European countries expect a new wave of Ukrainian refugees as Russia plans to attack energy plants before winter.

Economic environment

Inflation decreases. Inflationary figures in October were fairly good news in Mexico as prices logged a slower than expected increase in both general and underlying inflation. Month to month, general prices increased 0.57% (vs 0.61%e.). with which annual inflation decreased to 8.41% (vs 8.46%e.). There was also a surprising figure regarding underlying inflation, which increased 0.63% monthly (vs 0.65%e.); although the component continued its increasing trend at an annual rate (8.42%). Non-underlying inflation logged its lowest rate since at least 2013, after a contraction in agricultural prices (-0.52% m/m), which helped offset an increase in energy prices (1.57%) – which continued rising due to the end of seasonal electric bill subsidies. Regarding underlying inflation, commodities (0.87%) and services (0.33%) logged moderation with respect to September`s figures, which contributed to underlying prices logging their slowest pace of monthly growth since July. Food continued logging high inflationary rates during the month (1.03%) but non-food goods became more moderate (0.69%). Concerning services related to food, telephone, medical services and tourism, these logged the largest increases (0.49%), but relatively low figures were recorded in housing (0.22%) and education (0%). The news confirms that it`s likely inflation reached its peak between August and September, in line with the central bank`s expected scenario. However, high underlying inflation and inflationary uncertainty in the US will likely keep the Central Bank of Mexico carrying out an increasing rates cycle, at least until the begging of 2023. The pace at which rates are hiked could become more moderate in December if tomorrow`s United States inflationary data is benevolent and allows the FED to increase rates in a less aggressive manner, but Banxico is not expected to stop mirroring the FED in what`s left of 2022.