December hike odds supported by BoJ outlook: Japanese Yen – BBH

1.25% is the Bank of Japan (BoJ) policy rate expected by Brown Brothers Harriman’s (BBH) Elias Haddad. He expects policymakers to assess September’s rate rise before resuming tightening. Stronger underlying inflation could prompt a more hawkish Outlook Report. Swaps indicate a high probability of a December increase to 1.50%, with the shift in expectations seen as supporting the Japanese Yen (JPY).

1.25% BoJ hold expected as hawkish expectations strengthen

"The BoJ is widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again."

"In September, BoJ Governor Kazuo Ueda warned that rapid rate hikes could unsettle asset prices, adding that it could take some time to confirm that 2% inflation is entrenched."

"Still, firmer underlying inflation leaves scope for a more hawkish Outlook Report, lifting BoJ rate expectations in favor of JPY."

"The swaps curve price in 75% odds of a 25bps BoJ rate hike to 1.50% at the December 18 meeting and nearly 75bps of tightening in the next twelve months."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)