Growing concern that underlying inflation expectations could become unanchored is said to be driving the Bank of Japan’s case for higher interest rates.

At the conclusion of its closely watched monetary policy meeting, the BoJ is widely expected to raise rates by 25 basis points to 1.00% on Tuesday afternoon local time.

In a break from convention, Deputy Governor Ryozo Himino will chair the policy meeting, while Shinichi Uchida is set to deliver the post-meeting press conference in the absence of hospitalised Governor Kazuo Ueda.

Despite some positive developments in the Middle East, BoJ officials have expressed concern that the pace at which companies are passing higher costs on to consumers has accelerated to a point where policymakers may need to act. “If we miss the timing, we may be forced to raise rates significantly later.” (LiveSquawk – Continue Reading)

The apparent winding down of the Iran war is set to improve investor confidence in Europe’s largest economy, according to analysts.

An analysts’ poll predicted that the forward-looking economic sentiment reading from a survey conducted by Germany’s ZEW economic institute is expected to climb to -6.0 points from the -10.2 in May, itself an improvement over April’s result, which was a three-year low.

The institute’s current conditions indicator is expected to edge higher to -77.0 points from -77.8, which would keep it in negative territory, its home since December 2021. (LiveSquawk – Continue Reading)

Ahead of Wednesday’s FOMC decision, the watchword among central bank watchers has been “continuity”. Anyone expecting Kevin Warsh, the newly appointed Fed chair, to shake things up at his first meeting in charge will likely be disappointed.

Federal Reserve policymakers are widely expected to leave interest rates unchanged at the conclusion of their two-day meeting, with the fed funds target range currently at 3.50%-3.75%. The decision is expected to be unanimous.

Analysts look for the accompanying statement to acknowledge continued labour market resilience, while also recognising elevated inflationary pressures.

JP Morgan economist Michael Feroli said these developments could push the committee in a more hawkish direction. (LiveSquawk – Continue Reading)

A rate hike at this Thursday’s Bank of England decision had already become highly unlikely. And thereafter, the US-Iran deal has nudged the pendulum back towards a prolonged pause. Markets now price just a 25% chance of a July hike and only one rate increase this year, down from a peak of three.

Our view has long been that the Bank is somewhere between doing nothing and hiking once – and 4% inflation is an important line in the sand. The Bank argued last summer that when it exceeds that level, it’s more likely that inflation becomes more embedded and second-round effects more likely. (ING – Continue Reading)

Leaders of the G7 countries are expected to reach agreement on a list of critical minerals on which they should cooperate to curb Chinese dominance, but the EU is pushing back against a US demand for minimum pricing of minerals.

The G7 plans to release an outcome document on critical minerals at the summit that will focus on a small number of strategically important minerals, including heavy rare earth elements such as antimony, graphite and tungsten.

But the EU is leading resistance to a plan drawn up by US vice president JD Vance that would feature minimum pricing for critical minerals based on a pricing formula drawn up by the US Pentagon. (EU Observer – Continue Reading)

US companies looked to offload more than $40 billion of debt in the credit markets on Monday, as they tried to capitalize on investor optimism after the US and Iran reached a tentative agreement to reopen the Strait of Hormuz.

Borrowers from Nvidia Corp. to Qnity Electronics Inc. sought to capitalize on a rally across global markets as oil prices tumbled, stocks climbed and short-term Treasury yields fell, indicating lower expectations for US interest-rate hikes in the near term. Nvidia was set to be the biggest issuer in the investment-grade market, while Qnity brought one of the largest offerings to leveraged loan investors as prices on high-yield debt rose, driving yields lower. (Bloomberg – Continue Reading)