BOJ Set to Hike Rates Next Week Amid Rising Inflation Pressures

The Bank of Japan (BOJ) is set to raise interest rates next week by 25 basis points, bringing its policy rate to levels unseen in 31 years. The hike would bring the BOJ's policy rate to 1.25%, a significant increase from the current rate.

According to sources familiar with the central bank's thinking, a rate hike just three months after its last one in June suggests a faster pace of tightening, especially if the bank raises rates again this year. Many at the BOJ see conditions falling into place for another rate hike as the economy recovers moderately and price pressures heighten the risk of an inflation overshoot.

The move comes on the heels of the European Central Bank's (ECB) decision to raise interest rates by 0.25 percentage points to 2.50%. The ECB warned that 'the conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period.'