BOJ policymaker Koeda: Inflationary risk is already materialising

Bank of Japan policy board member Koeda says underlying inflation already around 2%

BOJ policymaker Masu warns that yen depreciation may raise inflation expectations

The desk views the recent commentary from BOJ policymaker Masu as a critical signal regarding the potential for yen depreciation to elevate inflation expectations in Japan. Per the full note [source], Masu highlighted the risks associated with rising inflation expectations that could stem from a weaker yen, emphasizing the need for the BOJ to maintain a vigilant policy stance. This aligns with our assessment that the BOJ may need to adjust its policy rate in response to evolving economic conditions, particularly as Japan grapples with inflationary pressures that have emerged more prominently than in previous decades. Current market sentiment reflects a cautious approach, with traders anticipating potential policy shifts in the near term.

BOJ's Himino reaffirms rate hike path with Middle East risk the key caveat

ECB policymaker Kocher says waiting in April meeting was a justifiable decision

The desk interprets ECB policymaker Kocher's recent comments as a clear signal of the central bank's cautious approach amid rising inflation risks tied to geopolitical tensions. Per the full note [source], Kocher emphasized that while the ECB's decision to hold rates steady in April was justified, the ongoing Middle East conflict could necessitate action sooner than later. This aligns with market expectations, which currently price in approximately 80% odds of a rate hike by the June meeting. With inflation pressures mounting, the desk anticipates that the ECB will need to act decisively if conditions do not improve rapidly.