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...
Bank of Japan (BOJ) Governor Kazuo Ueda said on Wednesday that it is "still taking time" to sustainably reach the central bank's 2% inflation target, signaling a cautious approach to raising Japan’s near-zero interest rates.
Speaking at a panel during the International Monetary Fund (IMF) meeting, Ueda acknowledged the potential risks of moving too slowly in adjusting rates, which could lead to a yen depreciation and higher import costs. However, he stressed that moving too fast could also result in speculative activity that could destabilize markets.
"When there's huge uncertainty, you usually want to proceed cautiously and gradually," Ueda said. But he added, "If you proceed very, very gradually and create expectations that rates will stay low for too long, you could see a build-up of speculative positions."
The BOJ has already begun to move away from negative rates, raising short-term rates to 0.25% in July, citing Japan's progress toward reaching the inflation goal. However, Ueda emphasized the need to closely monitor global uncertainties, such as the US economic outlook, before making further adjustments.
Despite underlying inflation showing some upward momentum, Ueda explained that it is still "taking time" to achieve 2% inflation sustainably, citing global energy and food price increases and rising wages as contributing factors. The central bank continues to maintain an easy policy to raise inflation expectations and drive Japan to a stable 2% inflation equilibrium.
The BOJ is expected to keep interest rates steady at its upcoming policy meeting next week, with most economists predicting a further rate hike by March of next year. Ueda remained cautious about future rate hikes, stating it is difficult to determine the right size and timing, saying, "We can't telegraph all our future movements."
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