Bank of Japan Set for Hawkish Rate Hike Amid Rising Inflation
The Bank of Japan (BoJ) is set to raise interest rates on Friday, its highest level in 31 years. The decision comes as inflation rises and GDP data beats expectations. Futures markets are fully pricing a quarter-point rate hike, which would push the BoJ's benchmark interest rate to 1.25%, amid higher inflation, rising wages, and pressure from US Treasury Secretary Scott Bessent.
The Japanese central bank is following the Federal Reserve (Fed) and European Central Bank (ECB) in tightening monetary policy as global inflation concerns rise due to the war in the Middle East fueling Brent Oil prices above $100. The BoJ's decision will draw monetary policy closer to levels considered neutral for the Japanese economy.
Japan's Consumer Price Index (CPI) data from July revealed a 1.9% price growth, just below the BoJ's 2% target for price stability, while wages continue rising, hinting at stronger price pressures in the near-term.