BOJ Rate Hike Odds Rise as Fed Expectations Fade

The Bank of Japan's (BoJ) monetary policy is expected to be rangebound with an upward bias for the week of August 17, according to a report from mufgresearch.com. The fading expectations of an early Federal Reserve rate hike should be supportive.

The US July Consumer Price Index (CPI) report released on August 12 indicated moderate inflation, with the headline CPI rising 0.1% month-over-month and 3.4% year-over-year. Core services inflation accelerated slightly to 0.2% from 0.0% in June, but the year-over-year rate slowed to 3.0% from 3.2%

The market is pricing in just under an 80% probability of a BoJ rate hike in September, up from around 65% as of August 7. Rate hike expectations picked up following media reports that boosted the prospects of an early tightening move.