BoJ Governor Ueda says there are possibilities of a rate hike if either upward risks to prices emerge or downside risks to the economy are limited
- By June, probably no big upward pressure appears in consumer price data.
- It is possible to decide before confirming upward price pressure in price data.
- Communicating closely with government on monetary policy.
- When asked if a rate hike is not possible while the Strait of Hormuz is closed, the decision would depend on inflation risks and the economy beyond that.
- Not thinking there is a high likelihood of the current situation resembling the early 1970s.
- If the trend inflation overshoots by 2% by a big margin, then strong tightening could be required.
- In the process of adjusting rates towards neutral, all other conditions being equal.
- Japan's exposure to private credit is not big; it requires caution, given transparency in the sector is low.
- Unless significant downside pressure to the economy, a rate hike is possible.
- Rate hike decision and QT adjustment will be separate.
Context
BoJ Governor Ueda's comments suggest a nuanced approach towards potential rate hikes, contingent on inflation and economic stability. While he's not indicating immediate pressure to raise rates, the emphasis on a possible hike if inflation risks rise or economic downturns limit further suggests a cautious, data-driven strategy. This stance may impact the JPY and broader fixed income markets, as traders reassess expectations surrounding monetary policy adjustments.
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