Ueda's Speech Omits Any Mention of Consecutive Rate Hikes, Making a BOJ Hold in October a Near Certainty?

Stock News
6 hours ago

Zhitong Finance APP notes that Bank of Japan Governor Kazuo Ueda has shown almost no inclination to challenge the market's current bearish bets on a second consecutive rate hike this month, merely reaffirming the central bank's long-standing policy stance.

In a brief speech in Tokyo on Tuesday, Ueda said, "We intend to continue raising the policy rate and adjust the degree of monetary easing in line with changes in economic activity, prices, and financial conditions." The governor stated, "We will consider the timing and pace of these adjustments while assessing risks and the likelihood that our baseline outlook for the economy and prices will be realized."

These remarks come as economists widely expect the Bank of Japan to keep policy unchanged at the conclusion of its next monetary policy committee meeting on October 30. By restating the central bank's policy stance and economic views, Ueda did little to dispel these expectations while leaving room for a rate hike after October.

Overnight index swap pricing shows investors see about a 12% probability of a rate hike this month, down from as high as 40% early last week. When the December meeting is taken into account, the current probability of a hike surges to about 90%.

The governor reiterated the views he expressed after the central bank raised its benchmark rate last month, stressing the need to prevent inflation from exceeding the target. Ueda said, "We believe it is becoming increasingly important to stabilize the underlying inflation rate around 2%, to ensure that the risk of inflation overshooting the 2% price stability target does not materialize and adversely affect the economy."

The Bank of Japan raised its benchmark rate on September 18, just three months after its June hike, marking the shortest interval between rate increases since 1990. At the post-meeting press conference, Ueda said the central bank's policy phase has shifted to focusing on stabilizing the price trend, rather than pushing it toward the 2% target as it had for the past 13 years.

Ueda said it is necessary to closely monitor risks from the Middle East conflict, AI-related demand, and exchange rate fluctuations. He added that underlying inflation could rise above the target. In the summary of opinions from the September meeting, a government official—most likely Economic and Fiscal Policy Minister Minoru Kihara—said the government hopes the Bank of Japan will carefully assess the impact of the rate hikes implemented so far, signaling caution about further increases.

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