Inflation latest publications
Recessions occur because the Fed's short-term interest rates determine the level of all rates in the economy: the Fed's rate hike implies higher rates for credit to companies, for mortgage loans and for consumer loans, etc.
Banxico raised the policy rate by 75bp to 7.75% and signaled that another hike of this size was possible at its next meeting, but also that a larger hike was unlikely
June 22, 2022
Banxico will act “more forcefully” and deliver, a widely anticipated, larger 75bp hike
There is (now) a wide consensus that Banxico will match Fed’s expected hikes through December, taking the policy rate to 9.50% by year-end
They will peak once the Fed is done tightening. Slowing demand to bring down inflation without significant pain is “not getting any easier”, but markets (still?) price in a soft landing.
The European Central Bank (ECB) has taken a further step in its process of normalizing monetary policy by announcing at its latest meeting that it will end its asset purchase program in July, and that it is prepared to pick up the pace of its rate hikes to contain inflation, in line with other central banks.
The main goal is to avoid long-run inflation expectations de-anchoring; rates will be at a “modestly restrictive level” by year-end.
The Recovery Plan failed to fullfil expectations in 2021. As we look forward, we must focus on streamlining and accelerating its roll-out and on using it to transform our economy and invest wisely in projects with strong potential to increase employment and improve job quality and productivity.
We now expect more rate hike front-loading as the FOMC turns more hawkish following persistently high inflation readings from last week.