Energy Price Surge Tightens Central Banks, Hints at BoJ Rate Hike

Global energy prices have surged to their highest levels since mid-July due to concerns over Middle East energy supply risks and reduced flow from US strategic reserves.

Oil prices have risen significantly, while European gas prices have hit a record high since 2023, fueling higher bond yields and tightening central bank pricing.

However, fresh inflation data from the euro area shows no alarm bells, with small signs of increased transport costs spilling over into goods prices being overshadowed by lower services inflation.

The Bank of Japan (BoJ) data suggests no intervention, but US Treasury Secretary Bessent has added pressure on the BoJ to tighten, and hawkish board member Takata's comments have spurred a sharp repricing of BoJ expectations, making a September hike increasingly likely.