The Daily Update - US, Brazil, Mexico - Inflation

After Friday’s inflation numbers in the US, Dallas Fed President Robert Kaplan said he wants to see more confirmation that the Fed is making progress towards its inflation target. He stated, ‘I actually want to now see more evidence that we’re making progress in reaching our inflation objective’, and at the moment he is comfortable with the level of interest rates believing that they are ‘the perfect place for us to be’. On Friday, the inflation numbers missed for the fifth successive month. Both month-on-month and year-on-year were 0.1% lower than expected, coming in at 0.1% and 1.7%, respectively. Minneapolis Fed President Neel Kashkari also thinks that there is a good argument for a wait-and-see policy. ‘The CPI came in today, and again it came in low’ he said, adding ‘We have the luxury of waiting to see what actually happens, before we decide where to go with monetary policy’. At time of writing the chances of a rate hike between now and the end of the year are approximately 30% according to Bloomberg, down from nearly 42% this time last week.

Last week we also had inflation figures out from two of the United States’ southern neighbour’s. According to Brazil’s National Statistics Agency, the Latin American country’s consumer prices rose 0.24% in July, mainly on the back of higher electricity prices, thus the annual inflation rate fell to its lowest level in 18 years. Although the 0.24% figure beat market estimates for 0.18%, and was way better than the 0.23% deflation that occurred in June, the 2.71% in the 12 months through to July is still a long way from the 4.5% target the government set. The sluggish recovery after the South American country’s worst recession in over 100 years means that the government has already revised down its 2019 annual inflation target to 4.25%, and 4% for 2020.

On the other side of the coin we saw Brazil’s neighbour Mexico’s inflation rise more than expected. The 6.44% increase beat estimates and was the fastest pace set since 2008. The main driver behind the increase was the price of fruit and veg. The National Institute of Statistics and Geography (INEGI) said that fruit and veg rose a massive 21.86% in July on an annual basis. However, Agustin Carstens, the central bank Governor, believes the current rate of inflation will not last; and he expects to see the annual rate fall significantly at the start of next year.

Finally, the CIA’s director Mike Pompeo brought some reasoning to the recent tensions between the US and North Korea, announcing ‘I’ve seen no intelligence that would indicate that we’re... on the cusp of a nuclear war’. It seems that China’s President Xi's phone call on Friday to Trump and Kim Jong-un asking them both to 'stop talking' seems to have worked. Although, quite how he manages to get the leader of the free world to shut up is beyond us !!

Please read this important information before proceeding. It contains legal and regulatory notices relevant to the information on this site.

This website provides information about Stratton Street Capital LLP ("Stratton Street"). Stratton Street is authorised and regulated by the UK's Financial Conduct Authority. The content of this website has been prepared by Stratton Street from its records and is believed to be accurate but we do not accept any liability or responsibility in respect of the information of any views expressed herein. The information, material and content provided in the pages of this website may be changed at any time by us. Information on this website may be out of date and may not be updated or removed.

The website is provided for the main purpose of providing generic information on Stratton Street and on our investment philosophy for the use of financial professionals in the United Kingdom that qualify as Professional Clients or Eligible Counterparties under the rules of the United Kingdom Financial Conduct Authority (the "FCA"). The information in this website is not intended for the use of and should not be relied on by any person who would qualify as a Retail Client. Products and services referred to on this website are offered only at times when, and in jurisdictions where, they may be lawfully offered. The information on this website is not directed to any person in the United States. The provision of the information on this website does not constitute an offer to purchase securities to any person in the United States (other than a professional fiduciary acting for the account of a non-U.S person) or to any U.S. person as such term is defined under the Securities Act of 1933, as amended.

The website is not intended to offer investors the opportunity to invest in any Alternative Investment Fund ("AIF") product. The AIFs managed by Stratton Street are not being marketed in the European Economic Area ("EEA") and any eligible potential investor from the EEA who wishes to obtain information on the AIFs will only be provided with materials upon receipt by Stratton Street of an appropriate reverse solicitation request in accordance with the requirements of the EU Alternative Investment Fund Managers Directive ("AIFMD") and national law in their home jurisdiction. By proceeding you confirm that you are not accessing this website in the context of a potential investment by an EEA investor in the AIFs managed by Stratton Street and that you have read, understood and agree to these terms.

No information contained in this website should be deemed to constitute the provision of financial, investment or other professional advice in any way. The website should not be relied upon as including sufficient information to support any investment decision. If you are in doubt as to the appropriate course of action we recommend that you consult your own independent financial adviser, stockbroker, solicitor, accountant or other professional adviser. Past performance is not necessarily a guide to the future. The value of investments and the income from them may go down as well as up. An application for any investment or service referred to on this site may only be made on the basis of the offer document, key features, prospectus or other applicable terms relating to the specific investment or service.

Where we provide hypertext links to other locations on the Internet, we do so for information purposes only. We are not responsible for the content of any other websites or pages linked to or linking to this website. We have not verified the content of any such websites. Such websites may contain products and services that are not authorised in your jurisdiction. Following links to any other websites or pages shall be at your own risk and we shall not be responsible or liable for any damages or in other way in connection with linking.

By using this site, you should be aware that we may disclose any information that we hold about you to any regulatory authority to which we are subject, or to any person legally empowered to require such information.

This website uses cookies to improve user experience, by clicking the "I Accept" button below means you consent to the use of cookies on our website.