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Mexico | Minimum wage increase:non-inflationary measure that improves the purchasing power

December 21, 2018
Twenty-five years after the 1994 crisis, the minimum wage will finally regain its real level and even exceed it.

Market Comment | Risk assets extend declines after FOMC meeting

December 21, 2018
As expected, yesterday the FOMC raised its benchmark interest rate by 25 bps for the fourth time this year. The assessment of growth, labour markets and inflation remained effectively unchanged. Moreover, the FOMC reaffirmed that, based on current and expected economic conditions, additional hikes are warranted, although the tone was adjusted

Global | GDP growth shows increasing signs of moderation ahead

December 21, 2018
Our BBVA-GAIN model suggests a slight upturn in growth in 4Q18 (0.8% QoQ). There was a positive rebound in hard data in October, but with signs of moderation looking ahead. However, confidence data declined further by year end, especially in developed countries, due to geopolitical risks and trade tensions. Concerns about further slowing in coming quarters are increasing.

FOMC Stands by its stars

December 20, 2018
As we expected, the FOMC raised its benchmark rate for the fourth time this year to 2.25-2.50%. The assessment of growth, labor markets and inflation remained effectively unchanged. On the policy outlook, the FOMC reaffirmed that further rate increases are consistent with the ongoing expansion.

Market Comment| Budget deal between Italy and the EU boosted Italian markets; Fed in focus

December 20, 2018
Financial markets continued in a cautious mood with all eyes on the expected hike of 25 bps in the US interest rate and on the Fed’s forward guidance later today. Powell’s press conference will be closely monitored. Today, Italy and the EU agreed on the italian budget plan, and the possibility of further China-US trade talks in January helped to ease ongoing trade concerns

Banxico to hike the policy rate and remain hawkish

December 19, 2018
The 25bp hike to 8.25% would be consistent with Banxico’s forward guidance and justified given core inflation’s stickiness to the downside and concerns on inflationary expectations.

U.S. Economic Outlook. December 2018

December 19, 2018
GDP growth outlook for 2019 and beyond tilted to the downside. Models suggest rising risk of recession, qualitative analysis indicates downside risks are also increasing. FOMC remains poised to raise rates in December. Likelihood for shallower rate path in 2019 rising. Labor market slack minimal; unemployment rate trending near 50 year lows.

Market Comment | High volatility in markets ahead of tomorrow’s FOMC

December 19, 2018
Volatility persisted in financial markets and risk-aversion mood also remained. The recent speech by Chinese President Xi in which he did not hint at any new measures to support the country’s economy, added some fears about a global economic slowdown . These fears, along with supply concerns also triggered a sharp correction in oil prices.

Spain | The GDP growth estimated for 4Q18 supports the 2.6% advance for 2018

December 18, 2018
The growth of the Spanish economy could stand between 0.7% and 0.8% quarterly during Q4, slightly above the average observed throughout the year (0.6% QoQ). Thus, the downward bias on the growth forecast for 2018 by BBVA Research (2.6% YoY) is moderated, but caution is maintained on the scenario given the persistence of several risks that hang over it.

Mexico | 2019 fiscal budget: the government approves its first big test

December 18, 2018
The fiscal package is sound in macroeconomic terms but introduces some microeconomic distortions. It is built on reasonable and market-aligned economic assumptions. Revenue and spending projections are conservative. As we expected, market reaction was slightly positive.

Mexico | Using international reserves – a bad idea for Mexico's economy

December 18, 2018
A few weeks ago, a group of legislators from Mexico's Labour Party (Partido del Trabajo, PT) said that Parliament should discuss the possibility of using the Central Bank's international reserves in the fight against poverty. I understand that this sounds like an attractive proposition.

Market Comment | Markets remain cautious early in the week ahead of FOMC meeting (preview)

December 18, 2018
Financial markets remained in a cautious mood at the beginning of a week full of monetary policy meetings. The Fed is expected to raise interest rates in this week’s FOMC meeting (see preview), while investors will also be hanging on the outcome of other central banks’ meetings such as those of the Bank of Japan and the Bank of England.

ECB, the real challenge is yet to come

December 17, 2018
Last Thursday the European Central Bank (ECB) announced that it was ending its asset purchase programme or APP, better known as QE or quantitative easing, four years after it had come into effect. With the benefit of hindsight and the experience of the United States, here are some reflections brought about by the announcement.

Insurance Outlook. Second semester 2018

December 17, 2018
Insurance sector is going to gain momentum in the next two years given the improvement in households' income and the decrease in unemployment. Climate change implies an economic cost for the insurance companies, financial sector and the economy as a whole.

Central banks and sustainable finance: From exoticism to stoicism

December 17, 2018
Ten years after the outbreak of the global crisis that led, among other things, to an unprecedented change in the international supervisory architecture and a regulatory tsunami, do you think anyone anticipated in 2008 that central banks and financial supervisors would be called upon to play a key role with regard to the risks of climate change? I didn't.

U.S. Recession Risk Monitor. December 2018

December 15, 2018
The probability of a recession is increasing. Correction in financial markets as participants adjust monetary policy and growth expectations. Treasury yield curve closer to inversion. Increase in corporate spreads highlight downside risks for nonfinancial businesses. Economic fundamentals for households and financial institutions remain solid.

Market Comment | Cautious mood returned to markets at the end of the week

December 15, 2018
Cautious mood in markets at the end of week, offsetting their improvement as fears over US-China trade relations eased with the announcement of potential tariff cut on US cars imported by China along with the release on bail of the Huawei CFO. However, the positive mood faded as disappointing economic data were released and due to the latest developments with Brexit

The Tourism Sector in Colombia

December 14, 2018
This observatory is examining the recent evolution of tourism, showing the sector’s importance for the economy and the variables explaining its recent boom. BBVA Research expects that the number of foreign tourists will double in the short term and that the tourism industry will replace coal as the second most important export.

Financial Regulation: Weekly Update. 14 December 2018

December 14, 2018
Highlights: BIS completes the revision of Pillar 3 framework and consults on leverage ratio window-dressing. EP asks Commission and Member States to intensify their plans for a no-deal brexit scenario. ECB updates list of entities. EBA publishes final guidelines on STS securitisations. HM Treasury continues to release Statutory Instruments in the context of brexit.

China | Risk pendulum shifts to a fast growth slowdown

December 14, 2018
Nov indicators are announced today, together with previously released trade and credit data, suggesting growth slowdown is faster than expectation despite the recent easing measures. A confluence of factors weighs on growth: dampened confidence of China-US trade tensions, the faded effect of front-loading exports and persistent tightening of domestic deleveraging.

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