BoJ Hikes Rates Amid Controversy, BoE Keeps Rates Unchanged

The Bank of Japan hiked its policy rate to 1.25%, in line with expectations, but the decision was not without controversy. The hike comes just three months after the previous increase and marks a change from the central bank's cautious approach.

The BoJ highlights its intention to continue raising the policy interest rate and adjusting the degree of monetary accommodation. Despite this, USD/JPY traded above 157 levels on the decision, reflecting some speculation about a potential jumbo hike and the fact that it does not sound like a central bank ready for back-to-back rate hikes.

Ahead of the decision, August CPI inflation excluding fresh food edged lower to 1.7%, below consensus. Domestic price pressures in Japan remain modest.