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July 30th - Foreign media analysis suggests that while US President Trump continues to pressure newly appointed Federal Reserve Chairman Warsh to cut interest rates as soon as possible, Wall Street investors are increasingly betting on the opposite outcome. Recent escalation of the conflict with Iran, the implementation of a new round of global tariffs, the continued data center investment boom, and strong US consumption have collectively exacerbated market and Federal Reserve concerns about inflationary pressures, reinforcing expectations of continued tightening policies or even further interest rate hikes. The market widely expects the Federal Reserve to keep interest rates unchanged at its Wednesday meeting. However, whether Warsh, who took over as chairman at the end of May, can continue to suppress calls for rate hikes within the committee increasingly depends on whether inflation can continue to improve. Current polls show that the American public is not satisfied with Trumps economic performance, and higher interest rates will undoubtedly further dampen the economic performance the White House hopes to see. Trump has consistently called for rate cuts and reiterated this stance this week. However, even if the Federal Reserve ultimately chooses to raise rates, Trumps initial target may not be Warsh, but rather other Federal Reserve officials. Trump has already appointed three members to the seven-member Federal Reserve Board of Governors. Trump previously stated, "Kevin is excellent, but he also has a committee, and the members of that committee are very politicized. He wants to do the right thing, and I know what he wants to do, but he also needs the approval of some people who may have ulterior motives. Interest rates should go down."Bank of Canada meeting minutes: The ongoing conflict in the Middle East has increased the upside risks to inflation.Bank of Canada meeting minutes: The possibility of new tariffs imposed by the United States is a "constant downside risk".Bank of Canada meeting minutes: Some members expressed concern about signs of rising medium-term inflation expectations, but all members agreed that long-term inflation expectations remained solid.Bank of Canada meeting minutes: Nevertheless, members noted that uncertainty remained high, partly due to the unpredictability of the Middle East conflict.

As BoJ Udea Mentions the Appropriateness of Current Monetary Policy, EUR/JPY Exhibits a V-Shaped Movement

Daniel Rogers

Feb 24, 2023 14:30

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When Kazuo Ueda, the nominee for Governor of the Bank of Japan (BoJ), addresses the Japanese parliament, the EUR/JPY currency pair exhibits a V-shaped movement. The commentary of Haruhiko Kuroda's successor as Governor of the Bank of Japan has increased the volatility of the Japanese Yen.

 

As he describes the current monetary policy as appropriate and necessary to sustain 2% inflation, BoJ Ueda's speech appears more diplomatic. Moreover, he stated that rising import prices are the cause of Japan's rising inflation. Domestic demand is still insufficient, but the central bank is attempting to achieve pre-pandemic growth rates. The neighborhood has descended into lunacy as a result of his speech's absence of Yield conversion control (YCC) discussions.

 

Despite current discussions about the expansion of the YCC, the economic outlook for the Japanese Yen is positive, as the Bank of Japan is working to increase labor costs, which will confidently support a revival in overall demand.

 

Nordea economists continue to be optimistic about the Japanese Yen: "We remain fairly sanguine on JPY due to our expectations of a change in Bank of Japan monetary policy later this year." According to a note from Nordea, the time is ripe for a normalization of the Bank of Japan's stimulative monetary policy, "with inflation reaching its highest level in decades and a prognosis for higher wage growth."

 

Despite the easing of inflationary pressures, investors are concerned that the normalization of the Eurozone economy will take a significant amount of time. In order to maintain a ceiling on the price index, the European Central Bank (ECB) is anticipated to continue raising interest rates.


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