1. Inflation in the U.S and Mexico

Inflation in the U.S reached 8.6% in May 2022, its highest level since December 1981. Meanwhile, Mexico’s inflation was 7.7% both in April and May 2022 (and 7.9% during the first half of June 2022), its highest level since January 2001

These inflation levels compare with 2001-2021 averages of 2.2% for the U.S and of 4.4% for Mexico

Thus, the average difference between Mexico’s inflation and that of the U.S has been 2.2% since 2001, which contrasts with the current-0.6% differential (one of the smallest in the last 20+ years)

2. Reference interest rates in the U.S.and Mexico (1/3)

After reaching a recent minimum of 4.00% in February 2021, Banco de Mexico started to increase the reference rate in June 2021, increasing it by 375 bps since then, reaching 7.75% as of June 23, 2022

In comparison, the reference rate in the U.S reached its 0.25% recent minimum in March 2020, as the Covid-19 pandemic was starting in the U.S.The Fed started to increase rates in March 2022, with cumulative increases of 150 bps so far?

The current spread is thus 600 bos, relatively higher han the average spread observed since December 2008 (446 bps), while in-line with the spread observed between May 2017 and May 2020