Bank of Japan Weighs Rate Hike as Inflation Persists
Bank of Japan (BOJ) board members recently held a debate on the possibility of raising interest rates, with many expressing concern over mounting inflationary pressure. The markets are now pricing in a 60 percent chance of a rate hike at the BOJ's next meeting on October 29-30.
The debate, held on September 18/19, 2023, saw several board members pointing to persistent inflationary pressure, with firms continuing to increase prices. Some even suggested that the time for a rate hike may be approaching. One opinion went as far as proposing another increase in the policy interest rate.
However, not all board members were in agreement. Two dissented, calling for an interest rate hike to 0.75 percent at the September meeting. Despite this, many called for vigilance and caution, suggesting that more data should be gathered before raising rates. Uncertainty over U.S. tariffs and other external factors has also receded, allowing for a real interest rate increase to be considered.
The BOJ's next meeting on October 29-30 will be crucial, with markets pricing in a 60 percent chance of a rate hike. The debate among board members highlights the seriousness of the inflationary pressure and the need for a potential rate increase. However, the final decision will depend on the data available and the consensus among the board members.
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