Last week it was revealed that the Inflation in the United States was lower than expected as of October with an annualized rate of 7.76 percent and a monthly rate of 0.43 percent.
This was the fourth consecutive decline in the annual rate after reaching a maximum of 9 percent in June. Yesterday, it was reported that producer prices were up 8.0 percent in October after being 8.5 percent in September.
Apart from the decline in general inflation, there was also a reduction in so-called “core inflation” That excludes food and energy, which stood at 6.30 percent from its peak of 6.65 percent in September.
Stock markets celebrated This result and the spectacular increase in them last Thursday and Friday, is the highest since 2020. They subsided on Monday and rose again yesterday.
Nasdaq index rose 9.4 percent in a few days, The S&P followed it at 6.5 percent and the Dow Jones at 3.8 percent.
The logic behind the rise in share prices is Federal Reserve likely to slow The forthcoming interest rate hike after announcing its decision on 14 December.
In the case of MexicoThe October’s inflation rate was 8.41 percent And it recorded its first monthly decline.
However, unlike what happened in the United States, the so-called underlying inflation which also excludes highly volatile energy and food components, uptrend maintained And it remained at 8.42 per cent.
That wasn’t enough to stop the Mexican stock market from celebrating the results in the United States, which rose nearly 3 percent between Thursday and Friday.
Food inflation remains at a very high level. The inflation of food articles and agricultural products in our country is close to or more than 14 percent per annum.
I think the celebration of the markets with respect to the October data in the United States is still premature.
It seems that inflation is not actually rising anymore. But a reduction in core inflation in the US This is still a very weak signal. that the process is controlled.
And, the downward trend in terms of energy and food is not new, but it is still not enough.
For example, the World Bank estimates that Energy prices will fall by 11 percent in 2023. But after a projected increase of 59 percent this year.
WTI-type oil is currently trading at only $87 a barrel, but was above $60 in the years prior to the pandemic.
In the case of MealHave an estimate average decrease of 6 percent for next year. For example, corn is currently trading around $660 per bushel, but before the pandemic it was near $400.
Broadly speaking, a fall in raw material prices is feasible due to an expected global economic slowdown.
but, Dropping their prices won’t be enough To compensate for the increase in the period following the epidemic and the Russian invasion of Ukraine.
Even if we are optimistic and believe that inflation has indeed turned, it is most likely The rate of decline is slow.
That might be enough for the Federal Reserve to raise its interest rate by “just” half a percentage point at its next meeting, but a potential down cycle would still be a long way off.
And, if Banxico, as expected, follows in the footsteps of the North American Monetary Authority, the forecast is that Let’s end the year with a target rate of 10.50 percent Which in any case will remain the largest in history since the use of this device.
So be careful not to throw the party too early.
