Today’s News
The Bank of Japan (BOJ) is poised to consider an interest rate hike on Wednesday, in tandem with a plan to substantially reduce its bond purchases over the next one to two years, signaling a major shift from its longstanding expansive monetary policy.
This decision contrasts with the U.S. Federal Reserve’s current direction, which might include rate cuts as early as September due to a different economic climate.
Image Source: The Malaysian Reserve
During a critical two-day meeting concluding Wednesday, the BOJ plans to discuss halving its monthly bond acquisitions, aligning with market expectations and marking a clear move towards quantitative tightening. Additionally, the BOJ will deliberately raise the overnight call rate target to 0.25% from its current range of 0-0.1%, levels not seen since 2008.
This strategy represents a significant departure from the BOJ’s usual policy stance, especially as market dynamics have adjusted, with the yen strengthening on anticipations of the rate hike.
Despite dominant market predictions favoring unchanged rates, BOJ’s potential adjustments suggest a readiness to transition to a higher interest rate environment, reflecting confidence in Japan’s economic resilience despite recent inflation pressures and wage increases.
Image Source: The Japan Times
Governor Kazuo Ueda has indicated that future rate hikes could be implemented if wage growth supports sustained inflation around the BOJ’s 2% target. He also mentioned that the central bank aims to adjust short-term rates to a neutral level that neither restricts nor stimulates economic growth, projected between 0.5% and 1.5% over the coming years if inflation remains stable.
Other News
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Standard Chartered has unveiled a record USD 1.5 billion share buyback and raised its 2024 income growth projection, buoyed by strong Asian market performance and a comprehensive cost-cutting plan.
Microsoft Falls, Chipmakers Surge Amid AI Sector Split
Microsoft’s disappointing quarterly results led to a significant loss in market value, contrasting sharply with gains in AI chip manufacturers like Nvidia and AMD, which reported strong earnings.
FINMA Examines UBS’s Vetting of Credit Suisse Clients
Swiss financial watchdog FINMA is closely monitoring UBS as it integrates clients from the defunct Credit Suisse, particularly focusing on how UBS screens these clients to avoid inheriting problematic accounts.
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