The Day at a Glance | September 9 2021

The Top

*ECB slows its purchasing program.

*Inflation in Mexico slowed down during August (5.59% annual), in line with estimates.

*Secretary of the Treasury Janet Yellen warns legislators should increase the debt ceiling as the Treasury could run out of cash in October.

*Inflation for producers in China accelerated to its highest level in 13 years in August (9.5% annual), which could put pressure on prices at a global level.

*Unemployment claims in the US continue to decrease (310 thousand vs 335 thousand e.).

Economic environment

The European Central Bank slows its bond purchases. In its monetary policy meeting this morning, the ECB announced that it will slow its quantitative easing program´s monthly purchases, while interest rates remained unchanged. Now, the ECB expects to purchase bonds at a more moderate pace – less than the 80 billion monthly euros it carried out in the last two quarters. The program will stay in place until March 2022, but Europe´s economic recovery is strong enough for the stimuli to be decreased, the ECB assured. The Governing Council hasn’t started discussing the elimination of stimuli altogether, but several of its members have started warning about risks of sustaining an ultra-accommodative stance for a long period of time, which is why the bank may possibly start to steer its statements towards monetary normalization. In a press conference, Christine Lagarde assured that inflation could exceed the ECB´s target for some time, but the central bank still expects this to be temporary. The ECB revised its economic growth forecasts upwards for 2021 (5% vs 4.6% prev.), while for 2022, figures were slightly revised downwards (4.6% vs 4.7% prev.); and for 2023, estimates remained unchanged (2.1%). Inflation is expected to set at 2.2% in 2021, above the 1.9% figure estimated in June; with upwards revisions also made for 2022 (1.7% vs 1.5% prev.) and 2023 (1.5% vs 1.4% prev.). Lagarde assured that acceleration in underlying inflation will be gradual in the mid-term and a long lasting expansive monetary policy will be necessary to reach the central bank´s 2% long term target.

Inflation in Mexico slows down. According to figures made public by the INEGI this morning, inflation in Mexico increased 0.19% during August and set at an annual rate of 5.59%, its lowest level since March. The annual rate´s decrease is largely explained by a fall in energy prices (-3.5%), which occurred because of price controls on LP gas. Nevertheless, underlying inflation still increased (0.43% monthly, 4.78% annual) and was mostly boosted by merchandise prices (0.7% monthly). Services recorded a much more moderate increase (0.12%) after important declines in tourist services and airfares. The persistent rise in underlying inflation will keep the Central Bank of Mexico alert for it to have it converge to its target. No change is expected to be made in the central bank´s stance in its next monetary policy meeting, scheduled to take place on September 30th, however, markets expect the increase in interest rates to resume in November.