The Day at a Glance | Sep 21 2022

The Top

*The FED is expected to increase rates for a fifth consecutive time this afternoon (+75bp e.; 3%-3.25%e.).

*Russia mobilizes troops to defend occupied territory in Ukraine; Putin calls on 300 thousand military reservists.

*Retail sales in Mexico increased more than expected during July (0.9% monthly; 5% annual).

*The People`s Bank of China assured that there is enough room to ease its monetary policy if necessary.

*Christine Lagarde, President of the ECB, affirmed that they will continue increasing rates in the following meetings.

*Germany nationalizes energy company Uniper, the largest importer of Russian natural gas.

Economic environment

Decision in the United States Federal Reserve. This afternoon (1:000 pm Mexico City time), members of the Federal Reserve will send out a press release revealing their monetary policy decision, in which a 75bp federal funds rate increase is expected to occur – taking it to 3%-3.25%. With this, the interest rate in the United States would reach its highest level since 2007 and the FED would be implementing one of its most aggressive increasing interest rates cycles since the 1980`s. Additionally, macroeconomic forecasts will be made public, with new growth, inflation, unemployment and interest rate estimates. These forecasts are expected to confirm Powell`s message regarding high interest rates for an extended period of time, which is why the FED`s dot plot is expected to point towards a 4.5% rate towards 2023, remain at said levels until at least 2024 and then go down to 3.5%. Some analysts even expect the rate to reach 5%, and for it to remain at said level until 2025. Concerning growth and unemployment, the FED is expected to forecast lower growth and greater unemployment as both elements are necessary for the stability in prices to be reached. As for inflation, the FED is expected to increase its estimates and point out that inflation will not reach its 2% target level until 2025. Lastly, in its press release, the FED is expected to reiterate its commitment to control inflation, even though this could include an indication that interest rate increases will be more moderate in the following meetings as the FED approaches a terminal rate. After the press release, Jerome Powell will have his usual press conference (1:30 pm Mexico City time). Powell is not expected to modify the central bank`s recent hawkish tone, with which he has reiterated the need to not ease monetary policy until inflation is under control.