The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
The Bank of Japan (BOJ) raised interest rates on Wednesday and introduced a detailed quantitative tightening (QT) plan, marking a significant step towards phasing out a decade of massive stimulus.
Key Decisions:
- Interest Rates: BOJ raised the overnight call rate target to 0.25% from 0%-0.1%, a level not seen since 2008.
- Quantitative Tightening: The BOJ will halve its monthly bond purchases to ¥3 trillion (RM90.56 billion) starting January-March 2026, down from ¥6 trillion.
Market Reaction:
- Currency: The yen initially rallied 0.8% to a three-month high of 151.58 per dollar but later reversed gains.
- Bonds: Yields on 10-year Japanese government bonds fell slightly following the announcement.
Economic Outlook:
- The BOJ cited broadening wage hikes and rising import prices as reasons for the rate increase.
- The decision aligns with rising inflation expectations and a need for vigilant inflation risk management.
Comments from Economists:
- Fred Neumann, chief Asia economist at HSBC, noted, "The BOJ is on course to tighten further, with another interest hike likely by the start of next year."
Projections and Future Plans:
- The BOJ's quarterly outlook maintained the projection that inflation would stay around 2% through fiscal 2026.
- Governor Kazuo Ueda is expected to further explain the decision at a press conference.
Context:
- The decision comes as the US Federal Reserve considers cutting interest rates, potentially reversing its aggressive rate-hike cycle.
- The BOJ had ended negative rates and bond yield control in March, shifting away from its radical stimulus programme.
The BOJ's move is seen as a decisive step in normalizing monetary policy, signaling a potential path for further rate hikes if economic conditions continue to align with their projections.
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