The Day at a Glance | October 28 2022

*PCE inflation didn’t show any surprises prior to the FED`s decision.

*Tourism GDP in Mexico increased 5% annual in the 2Q22.

*Germany`s economy logged surprising expansion in the 3Q22 (0.3% q/q), challenging forecasts that expected a recession in the region.

*The Central Bank of Japan decided to maintain an ultra-accommodative monetary policy, sign that there will be no more interest rate increases in the short term.

*At least 3 members of the ECB voted for a smaller increase in yesterday`s decision: Bloomberg.

*France and Spain`s GDP increased 0.2% in the 3Q22.

*Germany warns of Russian danger in Europe after Putin affirmed that the world faces a “dangerous” decade.

Economic environment

No surprises. Inflation in the United States, measured by the Personal Consumption Expenditures Price Index, logged a 0.3% monthly increase in September and set at 6.2% annual, in line with estimates. Underlying inflation increased in line with estimates (0.5% m/m; 5.1% y/y) and maintained expectations that the FED will increase the interest rate in 75 base points in its next monetary policy meeting, scheduled to take place next week – and starting December, it could slow interest rate increases. The employment costs indicator also backed this view as it started showing signs of stabilization in the 3Q22 (1.2% q/q) after having recorded constant acceleration since the end of 2021, which finally seems to have stopped. Other figures made known have confirmed resilience in personal consumption, which increased 0.6% during the month; along with a 0.4% increase in personal income. The consensus expects the FED to increase rates up to 5% at the start of 2023, and after that, it would pause to assess the effects of the interest rate increases on the economy and inflation. The slowdown that has been logged in some of the economy`s sectors in recent weeks is expected to become more widespread towards 2023 and contribute towards less inflationary pressures, which would allow the FED to pause the increasing rates cycle. Markets have started to take this scenario into account with greater probability after one of the most accurate indicators of a recession (the differential rates between 3-month and 10-year sovereign debt instruments) has inverted in the last few days.