The Day at a Glance | Sep 27 2022

The Top

*FED could stop the increasing rates cycle once the restrictive level is reached in March: Charles Evans, Chicago FED.

*A drop in pressure and gas leaks were discovered in the Nord Stream pipeline system; Germany accuses Russia of sabotage.

*Total exports in Mexico decreased during August (-0.86% monthly; +25.2% annual) after a drop was logged in oil exports.

*Unemployment in Mexico set at 3.3% during August.

Economic environment

Members of the FED. After last week´s monetary policy decision, members of the United States Federal Reserve have returned to public forums to make statements about the increasing rates process. The member who most recently expressed his stance was Charles Evans, President of the Chicago FED; this morning, he assured that the central bank could probably pause and wait to assess the increasing rates process once the estimated peak has been reached in March of 2023 (4.5%). He even assured that it´s possible that a recession could be avoided given the surprising strength seen in the labor market. Evans assured that the expected level in rates will be enough for a pause to be taken in March – as long as there is no adverse event that would make inflationary risks materialize. If inflation has started to decrease by the second half of 2023, it´s possible that they may start thinking about reducing the interest rate. At the moment, it´s clear that the FED will continue increasing the rate until it reaches a restrictive level in order to control inflation, Evans affirmed. Evans has been considered to be one of the FED´s least aggressive (dovish) members regarding his preferences on the FED´s monetary stance. His comments were made after the FED increased the rate above 3% for the first time since the 2008 financial crisis. Other members like Susan Collins (Boston FED), Loretta Mester (Cleveland FED) and Raphael Bostic (Atlanta FED) were less optimistic about the end of the increasing rates cycle and only reinforced the idea that there is much more left to do to control inflation, which maintains markets nervous as there rates could increase even more. James Bullard and Jerome Powell are expected to make comments in other events tomorrow.

Imports and exports in Mexico decreased during August. Timely trade balance data made known by the INEGI pointed towards a monthly setback in exports (-0.86%) and imports (-2.1%) in Mexico; although both logged double-digit increases at an annual rate (25.2% and 27%, respectively). The drop in exports is mainly explained by an important decrease in oil exports (-14.82% monthly), which is likely related to lower energy prices; meanwhile, non-oil exports have become stagnant (0.25%). As for imports, consumer goods receded the most (-5.55%), led by oil imports (-13.3%). With this, the trade balance deficit set at 3,618 million dollars (seasonally adjusted), which is less than the 4,314 million figure logged in July.