BoJ Governor Ueda says inflation upward risk could be a reason for raising rates, but not the only reason
Importance
Level 1
- Headline inflation to be higher for a while, but that does not mean underlying inflation is rising.
- Not always clear which risk comes first, a price overshoot or an economic hit.
- Not clear whether energy inflation would affect underlying inflation.
- There are limits in narrowing down the neutral rate.
- Real interest rates remain negative after December hike, believe financial conditions are accommodative now.
- At this point, we are not aware of inflation expectations spiking in the mid-and-long-term.