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On April 9th, Federal Reserve officials weighed different scenarios for the U.S. economy following the outbreak of war with Iran, including scenarios requiring interest rate cuts and scenarios potentially requiring rate hikes. The minutes of the March FOMC meeting, released Wednesday, showed that most officials were concerned that the war could impact the labor market, necessitating lower interest rates. At the same time, many officials also emphasized the risks of inflation, which could ultimately require a rate hike. The minutes showed that an increasing number of officials recommended including related wording in the post-meeting statement, mentioning the possibility of a rate hike under certain conditions. The minutes stated: "Some participants believed that there were good reasons to include a two-way description of future interest rate decisions in the post-meeting statement to reflect that raising the target range for the interest rate might be appropriate if inflation persists above the target level." Following the March meeting, several Fed policymakers indicated a preference for keeping interest rates unchanged while assessing the impact of the war. Overall, policymakers response to the war reflects their concern about the risks of their dual mandate. The minutes stated, "The vast majority of participants believed that both upside risks to inflation and downside risks to employment remained at high levels, and most participants noted that these risks had increased as the situation in the Middle East developed." At the March meeting, Federal Reserve officials maintained the benchmark policy rate in the range of 3.5% to 3.75%.Federal Reserve meeting minutes: The economic outlook of Federal Reserve staff projected that economic activity would be weaker than expected at the January meeting.Federal Reserve meeting minutes: War may slow the decline in inflation as expected.White House Press Secretary Levitt: The United States needs congressional approval to withdraw from NATO.Federal Reserves Daly: Long-term inflation expectations have been anchored.

The AUD/JPY exchange rate fluctuates below 90.00 as investors await BoJ action

Alina Haynes

Jan 18, 2023 15:03

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In the early Asian session, the AUD/JPY currency pair is bouncing violently in a narrow range below the resistance level of 90.00. Before the Bank of Japan introduces its first monetary policy of CY2023, the risk barometer indicates a sideways auction (BoJ). The AUD/JPY exchange rate reflects the consolidation of the AUD/USD, indicating an uncertain risk profile.

 

Investors anticipate that the Bank of Japan (BoJ) will not alter its policy stance on Friday, as doing so would increase financial market risk and hinder efforts to boost inflation. Previously, the Bank of Japan (BoJ) announced that the central bank will review the negative side effects of the decade-long ultra-loose monetary policy, generating the impression that the central bank is eager to abandon the easy policy.

 

The experts at Standard Charted expect the Bank of Japan to hold both the policy balance rate and the 10-year yield goal at their present levels of -0.1% and 0%, respectively. The recent decision to expand the 10-year JGB band to +/-50 bps (from +/-25 bps) will be evaluated by policymakers at the December meeting.

 

The replacement of current Governor of the Bank of Japan Haruhiko Kuroda will be widely followed. The next BoJ governor nominee is anticipated to be presented to the Japanese parliament on February 10, Reuters reported on Tuesday. Amamiya, Nakaso, and Yamaguchi are regarded as leading C.banking candidates.

 

Thursday is the expected publication date for Australian employment statistics, which investors are monitoring. The Unemployment Rate is expected to remain constant at 3.4%, according to the majority of economists. Aside from this, the Australian economy must have added 22,500 new jobs to the labor market in December, a down from the prior rises of 64K.

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