The Day at a Glance | October 25 2021

The Top

*Janet Yellen expects inflation to remain high until halfway through 2022, but rejected the idea that the U.S. will lose control over the rise in prices.

*Mexico`s economy contracted (-) 1.6% in August (3.8% annual), according to the IGAE.

*China once again implements quarantine measures and restrictions in light of new outbreaks of the virus that are affecting 11 of the country`s provinces.

*Unemployment in Mexico fell to 3.9% in September (4.2% without seasonally adjusted figures).

Economic environment

Yellen still expects inflation to be transitory; Powell acknowledges greater persistence. U.S. Secretary of the Treasury Janet Yellen assured that she expects inflation to remain high until halfway through next year, but rejected claims that the United States runs the risk of losing control over increasing prices. Yellen considers that issues such as disruptions among supply chains, the labor market, and other factors related to the pandemic will improve towards the second half of 2022, which will result in the easing of inflationary pressures. The ex-Chair of the FED doesn’t believe that control over inflation has been lost and maintains that this will be temporary. Her opinion is not different from the majority of the FED`s members`; although some concerns have started to come to light. In an event last Friday, Jerome Powell, current Chair of the FED, sent a message of concern regarding the risks and persistence of inflation; even though he considers that adjustments to the country`s monetary policy through increasing interest rates is still far away, and that the central bank must be patient. Powell confirmed that starting the purchasing program`s withdrawal this year is ideal, and that the bank finds itself well positioned to face different scenarios. It would be premature to increase interest rates now, he said, as this could affect the labor market`s recovery; even though he reiterated that they are ready to act if inflationary risks materialize.