The US economy expanded 2.0% at a quarterly annualized rate in the January–March 2026 period. The figure implies a rebound after the advance of only 0.5% in the last quarter of 2025. However, the increase came in below the 2.3% forecast by consensus. Government spending contributed positively to quarterly growth, driven by both the rebound following the shutdown and expenditures related to military operations during the quarter. On the private side, business investment was solid, though driven primarily by the boom in AI-linked data centers. However, private consumption showed mixed signals: goods spending practically stagnated and it was the health sector that sustained much of the increase in services consumption.

Our Take

This result represents a significant recovery compared to the meager 0.5% recorded in the fourth quarter of 2025, when growth was penalized by the federal government shutdown (October–November 2025). However, the foundations of first-quarter growth were not that solid, though the central scenario still points to relatively strong growth, as long as consumption remains resilient.

The Federal Reserve's preferred US consumer price measure — PCE — in the first month of the conflict with Iran meets expectations and rises in March to 3.5% annually, its highest level since August 2023. On a monthly basis, the increase was 0.7%. The core component rose to 3.2% annually — the highest since November 2023 — and 0.3% monthly.

Our Take

As was widely expected, the PCE is already reflecting the first effects of the energy shock from the Iran conflict. In just one month of war, it caused prices to rise to their highest level in three years. It is to be expected that in the coming months the figure will exceed the 4.0% threshold, though we continue to consider it would only do so temporarily, meaning second-order effects would be limited.

Brent has moderated its advance to $116 per barrel after briefly touching $127 at the start of the session — the highest level since the Ukraine war. This represents an intraday decline that is justified by the change of the Brent reference contract on the London Intercontinental Exchange (ICE), which shifts to July delivery rather than June. Added to this is a potential worsening of Middle East tensions. According to Axios, US Central Command was to present Trump with plans for possible military action against Iran to force it to the negotiating table. Earlier it was reported that Trump had rejected Tehran's proposal to reopen the Strait of Hormuz, indicating that the naval blockade will remain in place until a nuclear agreement is reached.

Our Take

Among investors, the reality of a more prolonged Strait of Hormuz closure is increasingly taking hold. A temporary oil spike is something markets can ignore, but a prolonged interruption of Hormuz flow changes the situation because it influences transportation costs, corporate margins, inflation expectations, and central bank reaction functions.

The Eurozone's Gross Domestic Product (GDP), on seasonally adjusted data, increased 0.1% in Q1 2026 relative to Q4 2025. Analyst consensus had expected growth of 0.3%. In the preceding quarter, GDP had expanded 0.2%. On an annual basis, the region's GDP grew 0.8% (+1.3% in Q4 2025).

Our Take

The figure reflects, to some extent, the initial pressure from the energy supply shortage after the outbreak of the Middle East war disrupted oil, petroleum derivative, and liquefied natural gas flows. The greatest risk is that the conflict is pushing the Eurozone toward a stagflation scenario.

Eurozone inflation accelerated in April by four tenths, bringing its annual rate to 3% — above forecasts — according to the preliminary estimate published by Eurostat, driven by the rise in energy costs, whose price increased 10.9% compared to the 5.1% of March. Meanwhile, the core inflation rate, which excludes the volatile prices of food and energy, decelerated one tenth in April to 2.2%.

Our Take

As expected, the main culprit was the rise in energy prices. However, deflationary pressures on goods prices also appear to be slowly diminishing. Given that fuel prices are likely to remain elevated in the coming months — following their decline throughout 2025 — their contribution to headline inflation should increase further, meaning the annual rate could soon reach 4.0%.

The European Central Bank (ECB) decided to keep its interest rates unchanged, leaving the deposit rate at 2.00%, the refinancing rate at 2.15%, and the marginal lending facility at 2.40%. The ECB indicated that although recent information has been consistent with its prior inflation assessment, the upside risks to inflation and downside risks to growth have intensified due to the Middle East conflict and the rise in energy prices. It also highlighted that long-term inflation expectations remain anchored, though short-term ones have increased.

Our Take

The ECB's decision reflects a cautious stance in the face of a more uncertain environment with greater inflationary risks stemming from the energy shock. The rebound in energy prices and the deterioration in economic sentiment could complicate the disinflation process toward the 2.0% price target. In this context, the ECB appears to be prioritizing flexibility and keeping all monetary policy options open, in a scenario where the risks for growth and inflation have become more difficult to balance.

The Bank of England (BoE) decided to hold interest rates at 3.75% at its April meeting, as expected. The British institution acknowledges the great uncertainty generated by the Middle East conflict and believes that, taking into account all risks to the economic outlook, it is appropriate to leave the rate unchanged at this meeting. The Monetary Policy Committee voted by a majority of eight members in favor of this decision, while one member would have preferred to increase the cost of borrowing by 0.25 percentage points.

Our Take

The disruption from the armed conflict will create a dilemma between higher inflation and lower output, and the appropriate policy response depends on the state of the economy. If the disruption is short-lived or the economy weakens, policy should prioritize preventing an unnecessary contraction in activity. If second-round effects are likely to be more significant, policy should focus on bringing inflation back to target more quickly.

Yesterday, the Federal Reserve held interest rates for the third consecutive meeting, as the market expected, but signaled growing divisions within the committee. Four members voted against the decision — something that had not occurred since 1992 — one because they wanted rate cuts and three because they disagreed with supporting an "easing bias in the statement at this time." Additionally, Jerome Powell indicated he will remain on the Fed's board after his term as chair expires, for a period still to be defined.

Our Take

The sharp division within the monetary policy committee reflects a very clear fact: a more restrictive or hawkish stance compared to prior meetings. As such, a prolonged pause — longer than initially estimated — in interest rates seems to be approaching, or at least the new Fed chair will face difficulty achieving consensus in favor of cuts in borrowing costs.

Corporate News

BanBajío reported first-quarter net income of 2.042 billion pesos, with an 18.0% year-on-year contraction. Total revenues fell 9.5% year-on-year, affected by a NIM contraction of 88 basis points to 5.40%, of which 57 basis points are explained by the decline in the TIIE and 31 basis points by changes in portfolio mix toward lower-yielding segments. The 2026 net income guidance was reiterated without changes in the range of 8.250 to 9.000 billion pesos, though the annualized first-quarter income sits at the lower bound of that range. The new CEO assumes the role on May 1.

Our Take

The 88 basis point NIM compression is significant and on its own explains most of the earnings decline, reflecting the bank's sensitivity to the lower rate cycle. The reiteration of guidance is a signal of management's confidence, though it is likely to land at the lower bound. The change in CEO on May 1 is an additional monitoring factor that the market will need to calibrate over the coming reports.

The four hyperscalers reported their quarterly figures. Alphabet was the standout: its cloud division surpassed US$20 billion versus the estimated US$18.4 billion. Cloud backlog nearly doubled from the prior quarter to exceed US$460 billion. Meanwhile, Amazon reported the strongest Amazon Web Services growth since the second quarter of 2022, with a 28% year-on-year advance. Microsoft delivered solid results but the reaction was more muted — Azure would grow around 40% in the current quarter, with questions around Copilot adoption by corporate users, with only 20 million paid seats currently. Meta was the most contrasting report: its shares fell more than 6% after raising its capex guidance to US$145 billion. CEO Mark Zuckerberg acknowledged that Meta does not have a very precise plan for how each AI product will be developed.

Our Take

In general, results have continued to show accelerated growth; however, doubts persist over the high capex levels, with Meta being the most relevant case: US$145 billion in capex without a consumer AI product that has achieved mass adoption is a bet the market is no longer willing to fund with the same premium it granted in prior quarters.

Eli Lilly raised its full-year sales guidance after reporting a solid quarter led by its obesity and diabetes drugs. The company also expressed confidence in the potential of its new obesity pill, which could significantly expand the addressable market for its GLP-1 treatments. Shares were advancing in pre-market trading.

Samsung Electronics reported first-quarter operating income with a 48-fold year-on-year jump in its semiconductor division, driven by demand for high-capacity memory chips for AI applications, and warned that it expects a severe supply shortage that will deepen next year.

The to-do list

Today's recommendation…

With the long weekend here, tonight a great option is Cancino Coyoacán in the south of the city: sourdough pizza, a relaxed atmosphere, and an accessible wine list that invites you to stay longer than planned. One of those pizzerias that becomes a favorite from the very first visit.