Spotlight on BoJ’s Ueda as First Meeting Looms
XM Group | Apr 21, 2023 07:59AM ET
Ueda to play it safe at his first meeting
The banking crisis may have been a blessing in disguise for the Bank of Japan as the turmoil sent Japanese government bond (JGB) yields diving, taking the pressure off policymakers to make any imminent tweaks to their controversial yield curve control policy. The 10-year yield, which the BoJ aims to keep below 0.50%, has not breached this cap since the crisis first unfolded.
Although the Fed’s favourite price gauge has moderated significantly from its high of 5.4% in 2022, the downward progress has slowed in recent months. The core PCE price index is forecast to have edged down slightly to 4.5% y/y in March.It is almost certain that the Fed will hike rates by 25 bps in March, but a bigger increment is highly unlikely. Nevertheless, a hotter-than-expected reading would reduce the chances of the Fed pausing in May, especially if the incoming data is overall positive.
The bigger question is whether the US dollar can enjoy a meaningful boost from a stronger set of numbers. Investors remain convinced the Fed will begin cutting rates in the second half of 2023 while other key central banks potentially remain on a hiking path.
So the data alone may not do much in tempering those dovish bets and the dollar may struggle to attract much upside unless Fed Chair Powell does a more convincing job of ratcheting up his hawkish rhetoric.
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