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The Bank of Japan maintained ultralow interest rates at its meeting last month after considering "the risk of missing a chance" to achieve its inflation target by prematurely revising policy, a summary of opinions at the meeting showed Thursday. "Although price projections have been raised somewhat, the risk of missing a chance to achieve the 2 percent target due to a hasty revision to monetary easing is much more significant than the risk of the inflation rate continuing to exceed 2 percent," according to the summary of the April 27-28 policy-setting meeting, the first under Governor Kazuo Ueda.

The Japanese yen should strengthen as rising expectations for a policy shift by the Bank of Japan is likely to prompt a repatriation of assets back to Japan, UBS Global Wealth Management says. "Almost 40% of economists now expect some yield curve control adjustment as early as June, according to a recent Bloomberg survey, and this is likely to prompt capital flow back to Japan, supporting the Japanese yen after decades of ultra-low yields," UBS analysts say in a note. The BOJ will allow some increase in 10-year Japanese government bond yields in the second half of 2023 as it tightens monetary policy, they say.

Johanna Chua, chief APAC economist at Citigroup Global Markets, reportedly said inflation is likely to be quite persistent and the Federal Reserve may go for two more rate hikes in coming times. Chua said Citi has a hawkish consensus view on the central bank's policy while arguing that the economy is not witnessing the kind of credit crunch that people are really worried about. "There is a slowdown in kind of credit conditions, tightening of credit conditions, but not sufficiently enough," Chua told Bloomberg TV. We expect a month-on-month core CPI at 0.435%. And then in the next couple of months, we will have a 0.4% month-on-month handle going into the June FOMC. So, we actually think the Fed’s going to hike two more times. We think the Fed’s not done until July. So we’re a little bit more hawkish," she said. Chua also said recession is unfortunately the necessary by-product to bring inflation down towards 3%. "So therefore, we don’t expect the Fed to cut, maybe, until basically first quarter of 2024," she said.

The bulk of market's upward repricing of the European Central Bank's terminal rate from the March lows is likely now behind. Pricing of the terminal rate, where the ECB pauses interest-rate rises, is currently around 3.75%, according to Refinitiv, up from lows of around 3.2% in mid-March. Even so, we think there could potentially be room for the pricing to push towards the 4% level (which had been breached in early March prior to the emergence of financial stability worries). This could happen if dataflow in coming weeks continues to support the narrative of resilient euro area growth and sticky core inflation. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

Bank of Canada Gov. Tiff Macklem said there is a risk that robust wage growth, elevated inflation expectations and frequent price increases from businesses could impede central bank efforts to slow inflation toward its 2% target. Such a scenario, he said in prepared remarks to a Toronto business audience, could prompt the central bank to resume rate increases, after deciding to pause following its January decision. Since March, the Bank of Canada has opted to keep its benchmark interest rate at 4.50%, or 4.25 percentage points higher than at the start of 2022. The Bank of Canada was the first of the major developed-world central banks to hit the pause button on rate increases, saying it was content to assess the impact of its rapid-fire rate increases on the economy. The central bank anticipates weak growth through the rest of this year.

The ECB has hiked rates by 3.5 percentage points since July last year in an unprecedented campaign of monetary tightening to bring soaring consumer prices under control. The central bank holds its next meeting on May 4 and, with inflation in the 20-nation currency club slowing, all eyes are on whether policymakers will implement another hike, and by how much. Chief economist Philip Lane said that "it will be appropriate to raise rates further" if the "baseline scenario" underlying the ECB's most recent forecasts in March holds. Markets and surveys by the central bank also expect that borrowing costs "will rise further in the near term and will remain at elevated levels for an extended period," said Lane, according to a speech posted on the ECB website. Eurozone inflation skyrocketed after Russia invaded Ukraine in February last year, and cut off key gas supplies to Europe. In March, consumer prices in the eurozone rose by 6.9 percent on an annual basis, down from 8.5 percent in February. But that is still far above the ECB's two-percent target, and policymakers have voiced concerns that core inflation -- excluding volatile energy and food costs -- remains stubbornly high. At its last meeting in March, the ECB lifted rates half a percentage point, as expected, despite calls to slow or pause tightening in response to turmoil in the banking sector.

Members of the Bank of Japan's Monetary Policy Board said that the country's economy has picked up steam, despite higher commodity prices, and it expected to continue to do so, minutes from the board's meeting on March 9 and 10 revealed on Monday. Improved employment and household income have been primary factors in the economic recovery, the minutes continued. In terms of inflation, the board said it will continue qualitative and quantitative easing to as long as necessary to achieve the central bank's price target of 2 percent. At the meeting, the BoJ left its ultra-loose monetary policy stance unchanged on Friday, maintaining a negative interest rate of -0.1 percent on current accounts that financial institutions maintain at the central bank. The BoJ board also kept its yield curve control policy unchanged, aiming to keep the yields on 10-year Japanese government bonds between plus or minus 0.5 percentage points in the final meeting led by Governor Haruhiko Kuroda.

The Reserve Bank of Australia said Tuesday that despite announcing a pause in interest-rate increases this month, it doesn’t want to send a message that the tightening cycle is over. “Members observed that it was important to be clear that monetary policy may need to be tightened at subsequent meetings and that the purpose of pausing at this meeting was to allow time to gather more information,” the central bank said in the minutes of its April 4 policy meeting. The RBA left its official cash rate on hold at 3.60% this month, snapping a record run of 10 consecutive increases that added an unprecedented 350 basis points to the rate since May last year. Any coming decisions about interest rates will depend on trends in household spending, the outlook for inflation and the labor market, and developments in the global economy, the minutes said.

The ECB's latest interest-rate hike is its seventh increase in a row, but as the smallest in the current cycle, it suggests the central bank has entered the final stage of this tightening cycle, ING's global head of macro Carsten Brzeski says in a note. While recent data suggests underlying inflationary pressure is stickier than expected, weak credit growth and the latest eurozone bank-lending survey indicates that rate hikes so far are leaving clear marks on the economy, he says. Indeed, at current levels, and given the lagged impact of tightening both in the eurozone and the U.S., the risk is that every additional rate hike from here could turn out to be a policy mistake further down the road, Brzeski adds.

Bank of Canada Gov. Tiff Macklem said Thursday that the central bank is prepared to raise interest rates again should headwinds emerge in its effort to wrestle down inflation to its 2% target. In Washington for the International Monetary Policy’s spring meeting, Mr. Macklem reiterated the central bank’s belief that inflation in Canada is set to slow quickly, from its current 5.2% level as of February to about 3% this summer. Inflation data for March is scheduled for release next week. However, he said the path to 2% inflation in Canada could be problematic, unless expectations for price increases retrench further, wage growth slows from its 4% to 5% pace and price-setting by businesses return to prepandemic norms. The Bank of Canada projects inflation to return to its 2% target by the end of 2024.