The Day at a Glance | October 12 2022

*The dollar`s appreciation is a logical result of the different monetary stances at a global level: Janet Yellen.

*Industrial production in Mexico increased during August (0% m/m, 3.9% y/y).

*IMF warns that the worst is yet to come in 2023; the fight against inflation will lead to risks and clouds the horizon.

*Loretta Mester (Cleveland FED) doesn’t see any reasons why the plans to reduce the central bank`s asset balance sheet should be altered.

*BoE is pressured to extend its bond purchasing program; the central bank`s economists see a considerable risk in increasing market rates.

*Inflation for producers in the United States increased slightly above estimates in September (0.4% m/m, 8.5% y/y).

*Biden assured that a recession in the United States is possible, but it would be “very slight” as the economy remains strong.

*NATO calls to increase Ukraine`s aerial defense.

Economic environment

The dollar`s strength. In an interview for CNBC, US Secretary of the Treasury, Janet Yellen, assured that it`s in the country`s best interest that the dollar`s value is determined by the market`s forces after being asked about the currency`s strength and the possible negative impact at a local and global level. Yellen considers that the rise is linked to the FED`s aggressive monetary stance and relatively low rates in advanced countries. The dollar linked 4 consecutive months of increases against the G-10`s currencies and Yellen`s comments have done nothing more but reinforce said trend as they show no signs that the US FED or the Treasury Department are worried about the dollar`s rise. Moreover, US interest rates still have room to increase and the risks remain skewed upwards as the FED is forced to do more in order to contain inflation in the future. On Thursday, inflationary data will be made known in the United States; it`s expected to slow down to a 8.1% annual rate. However, underlying inflation could surprise to the upside. In fact, it`s forecasted to reach its highest level since March, when it reached a 6.5% annual rate for the first time since 1982. The rebound in underlying inflation would be led by housing prices, which are expected to once again increase 0.7% monthly, their highest level since 1986. The overall rise in prices – evident in the underlying component – could reinforce the idea that inflation will descend more gradually and will require a more restrictive stance on behalf of the FED for a longer period of time. A scenario that will maintain the dollar`s strength.