(Bloomberg) — The Bank of Japan kept its monetary policy steady Friday, signaling it sees no need to hurry with interest rate hikes as it monitors financial markets after its July increase and hawkish views spooked investors.
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The BOJ maintained its settings for the unsecured overnight call rate at around 0.25%, according to its statement, as expected by all 53 economists surveyed by Bloomberg. The bank raised its assessment of consumer spending, a key engine of economic growth, and cited the need to monitor financial markets.
The central bank reiterated that it expects price growth to be in line with its goal in the latter half of its projection period, an indication it remains on a path toward hiking rates.
The yen fluctuated after the decision before strengthening to a high for the day against the dollar.
Governor Kazuo Ueda’s board hit pause after its clear hawkish tilt conveyed on July 31 was seen to have helped trigger a global market meltdown in early August. While board members have telegraphed their steadfast intention to continue normalizing policy as data allow, they’ve also stressed the need to monitor markets and their impact on the economy for the time being.
The board’s two-day meeting kicked off hours after the Federal Reserve conducted a long-awaited policy pivot with an outsized interest rate cut. In doing so, the Fed joined developed market peers including the Bank of England and European Central Bank in launching an easing cycle, a development underscoring the BOJ’s outlier status as the only major central bank on an upward course.
With the Fed’s move Wednesday intensifying momentum for a global easing campaign, views among BOJ watchers are divided on what sort of trajectory to expect in Japan. Market pricing indicates investors are less convinced than economists that the central bank will move again by the end of the year. About 70% of economists surveyed by Bloomberg expect another increase by December.
Ueda will elaborate on the thinking behind today’s decision and the outlook for inflation at a press conference that typically begins at 3:30 p.m.
(Updates with details from statement)
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