Investing.com — The Bank of Japan hiked interest rates earlier Wednesday, putting the focus on the Federal Reserve, which concludes its July meeting later in the session. Wall Street looks set to end the month on a positive note as investors digest earnings from the likes of Microsoft.
- BOJ hikes, and the Fed is next…
The Bank of Japan started the week’s central bank parade earlier Wednesday, raising interest rates and signaling its resolve to unwind a decade of massive monetary stimulus.
The Japanese central bank hiked its overnight call rate target to 0.25% from 0-0.1% by a 7-2 vote and laid out a detailed quantitative tightening plan that will reduce monthly bond buying in several stages to around Y3 trillion, half the current rough target, by early 2026.
Wednesday’s rate hike comes amid some improvements in Japanese inflation over the past two months, especially as consumer spending improved on stronger wages.
This trend furthered the central bank’s forecast that inflation will climb to its 2% annual target sustainably, and that monetary conditions will have to tighten accordingly.
In the U.S., by contrast, a benign June inflation report has investors looking for the policymakers to lay the groundwork for a September rate cut.
The Federal Reserve concludes its July meeting later Wednesday, and is widely expected to maintain its benchmark overnight interest rate in the current 5.25%-5.50% range, as it has done since last July.
Futures are fully priced for a quarter-point easing in September, with a small chance of a reduction of 50 basis points, and have 66 basis points of easing priced in by Christmas.
