The Day at a Glance | Sep 14 2022

The Top

*Wall street debates the likelihood of a 100bp interest rate increase on behalf of the FED next week.

*Inflation for producers in the US becomes more moderate for a second consecutive month (8.7% annual, August).

*Industrial production in Europe receded more than expected: -2.4% annual, July (vs 0%e.).

*Mortgage rates in the United States surpassed 6% for the first time since 2008: MBA.

*Moody`s considers a scenario of stagflation as the most likely to occur in Mexico.

*Yen appreciates in light of threats of intervention on behalf of authorities. 

*Germany considers nationalization of the Uniper energy company.

*IMEF considers that the overestimation in the 2023 Economic Package could create vulnerabilities in public finances.

*The EU seeks to collect up to 140 billion Euros with price caps on low cost electricity producers in order to face the climate crisis.

Economic environment

Aggressive FED. Yesterday`s inflationary data in the United States caused an important adjustment in future interest rate expectations and in the FED`s monetary policy towards 2023. Markets are now expecting that the rate could reach 4.5% by the end of the year and maintain said levels through 2023. For September`s meeting, the likelihood of a 50bp increase has been eliminated; now, a 75bp increase is expected to occur with a 66% probability. The likelihood of seeing a more aggressive increase, of up to 1%, has increased to 34%. Although the base scenario keeps expecting a 75bp increase, some market agents have started talking about the need of carrying out more aggressive interest rate increases in order to fight a more structural type of inflation: They are proposing bringing forward interest rate increases and halting inflationary pressures. However, most consider that the pace at which interest rate increases are being carried out should be maintained, as a 100bp increase could cause adverse reactions in markets. For others, the risks of a recession are increasing and the likelihood of seeing a completely inverted yield curve in the US debt market is very high – regardless of what the FED does. The FED will make a monetary policy decision on September 21^stand will make its new macroeconomic estimates known; with this, markets could further adjust their interest rate expectations.