Bank of Japan raises rate to 31-year high of 1.25% as inflation risks mount
BOJ still lags global peers with its policy rate lower than that of the ECB and the US Fed
The Bank of Japan (BOJ) raised its policy interest rate to a 31-year high of 1.25% on Friday, Sept 18, amid mounting inflation risks triggered by soaring oil costs. The unexpectedly hawkish move, which marks the first in three months, was carried out by a 7-2 vote, with two dovish board members dissenting. Despite the rate hike, investors focused on the lack of explicit hawkish guidance and the two dissents, causing the already weak yen to fall further to 156.91 per US dollar.
The BOJ highlighted that while economic and price developments are aligning with its baseline forecast, there is a risk of underlying inflation deviating from its 2% target. The bank's policy rate now sits within the estimated range of its nominal neutral rate and lags behind global peers, including the European Central Bank and the US Federal Reserve.
Market expectations anticipate further rate hikes, but the BOJ's cautious tone following the announcement leaves many wondering when and by how much the central bank will push interest rates higher.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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