The minutes of the Federal Reserve's June meeting showed a divided Committee regarding the direction of monetary policy. While the decision to hold the federal funds rate in the 3.50%-3.75% range was unanimous, several members considered that inflation could moderate sufficiently to justify a rate reduction later this year, while others estimated that inflationary pressures could persist and require further increases. Additionally, participants agreed that upcoming decisions will depend on the evolution of economic data and highlighted that risks to inflation remain skewed to the upside.

Our Take

The minutes document that the Committee explicitly discussed two scenarios, and in both conditioned action on upcoming inflation reports. The minutes also confirm that Kevin Warsh's arrival did not alter the Federal Reserve's cautious stance. Although there is broad debate about the future trajectory of rates, the Committee avoided offering clear forward guidance and reiterated that decisions will depend on available economic information.

Consumer inflation in China moderated to 1.0% annually in June, from 1.2% recorded in April and May, coming in slightly below the 1.1% expected by the market. The deceleration responded primarily to lower growth in non-food goods prices, particularly transportation, favored by the reduction in domestic fuel prices following the easing of tensions in the Middle East. In contrast, the Producer Price Index (PPI) increased 4.1% annually, accelerating from 3.9% in May and recording its largest increase since July 2022, driven by higher production costs and the rise in raw materials and energy prices.

Our Take

The data reflect an environment of mixed inflationary pressures in China. The loss of traction in consumer prices confirms that the recent rebound in this inflation was more linked to the oil shock than to a genuine recovery of domestic demand. Meanwhile, the rebound in producer prices shows that companies continue to face higher production costs, particularly in industrial inputs.

Various cross-attacks between the US and Iran have occurred in recent hours. On one hand, Iran's Revolutionary Guard has stated it has attacked two US bases in Kuwait and Bahrain, and warned it will extend its response to other bases in the region if the US military launches another offensive against Iran. Meanwhile, the US has launched attacks that struck approximately 90 Iranian military targets.

Our Take

While tensions in the region have increased substantially, which undoubtedly conditions traffic through the Strait of Hormuz at least in the short term, we do not believe the situation will deteriorate to one similar to what existed before the signing of the memorandum of understanding, as we understand that neither party has any interest in resuming the conflict on a broad scale.

Later, the minutes of the Bank of Mexico's June 25 monetary policy meeting will be published, in which the Governing Board decided to keep the overnight rate unchanged at 6.50%. In its statement, the central bank reiterated that it considers this rate level consistent with inflation convergence toward its 3% target in the second quarter of 2027.

Our Take

The most relevant element to monitor in the minutes is the degree of individual conviction among members regarding the duration of the pause. If the language of the deputy governors suggests a divergence of opinions about how long the rate should be held at 6.50%, the market could begin to speculate about the possibility of an adjustment later on, depending on the relative stance with the Fed and inflation figures. If instead the tone is uniformly cautious and emphasizes upside price risks, this would reinforce expectations of a prolonged pause.

Corporate news

South Korean semiconductor company SK Hynix is in the spotlight of investors after it became known that its US listing scheduled for tomorrow Friday was oversubscribed more than seven times.

Our Take

This placement, which will finance new factories and equipment to meet growing demand for components used in AI development, could become the second-largest equity placement in the world, only behind SpaceX's IPO, which last month raised a record $85.7 billion.

During the second quarter, PepsiCo reported a 2% decline in revenues from its North American food business and flat volume, after cutting prices by as much as 15% on some brands. Adjusted earnings per share were $2.20, slightly above consensus estimates. The company reaffirmed its fiscal year 2026 guidance and indicated it expects the lower prices to gradually help its recovery in the second half of the year. Shares were falling 1.5% in pre-market trading.

A late-stage trial of the drug Wainua, developed by AstraZeneca and Ionis Pharmaceuticals, failed to prevent cardiac problems in patients with a rare and potentially fatal heart disease. AstraZeneca shares fell as much as 9.3% in London, while Ionis plunged around 21% in pre-market trading in the US.

The to-do list

  • Follow the Banxico minutes at 9:00am: the key element is the degree of individual conviction among members about the duration of the pause.

  • It's Thursday, get ahead of as much as possible before the end of the week and don't leave anything important for Friday afternoon.

  • This afternoon (2pm) there is a quarterfinal: France vs. Morocco, one of the most attractive duels of the round, prepare something to snack on and enjoy a match that promises to deliver.

  • Dedicate 30 minutes to a climbing session at a bouldering gym or to a routine of pull-ups and lat pulls with a bar at home, exercises that work the entire upper body.

Today's quote…

"Small steps every day build great results over time."

— Robin Sharma