Inflation latest publications
June will be a key month for discovering how the two main central banks—the Federal Reserve (Fed) and the European Central Bank (ECB)—plan to begin to reverse the unprecedented expansionary policies launched at the start of the COVID-19 crisis.
After having seemingly vanished as a source of concern for many years, the fear of inflation has re-emerged, along with the first green shoots of recovery.
The CPI index increased by 4.2 percent (year-over-year) for April, a record-high since 2008. The likelihood of persistently high inflation re-emerged as one of the driving forces in financial markets. We examine the sector-level price data to determine if such a concern is well supported.
Inflation is increasing due to transitory factors. This means that the inflation in April of this year is the result of comparing the current price level against that observed in April 2020, which was the month when the strictest confinement due to the pandemic in the world was experienced
The pandemic has led to several historical comparisons, such as the 1918 influenza and the Roaring Twenties that followed. Another clear comparison is the massive Next Generation EU (NGEU) fiscal stimulus set to be launched in Europe, which resembles the Marshall Plan passed following World War II, but for the modern age.
As expected, Banxico acknowledged high inflation and rising risks, but at the same time noted that is still expecting inflation to converge to 3.0%, now in 2Q22.
Although historical evidence tells us that the increase in fuel prices observed over the last few months could considerably slow down recovery (by around one percentage point according to BBVA Research), there is reason to think that this time could be different.
In April, the Consumer Price Index decreased by 0,10%. With this outcome, inflation fell from 2,6% in March to 2,4% in year-on-year terms, mainly explained by the normalization of food prices.