Central Banks in Australia and Japan Weigh Rate Hikes
The Reserve Bank of Australia and Bank of Japan are considering interest rate increases to combat inflation and prevent price targets from being overshot.
Central banks in Australia and Japan are preparing for potential interest rate hikes to address persistent inflation. The Reserve Bank of Australia is scheduled to meet on September 29 to determine the official cash rate, currently at 4.35%. Major financial institutions, including Commonwealth Bank, Westpac, and ANZ, alongside CreditorWatch, forecast a 25 basis point increase to 4.55% following hotter-than-expected inflation data and global pressures from oil prices and the AI data center boom.
Economists suggest the Australian central bank is prioritizing a 2.5% inflation target, even if it results in slower economic growth and higher unemployment. Such a move would further reduce borrowing capacity for homebuyers and increase financial strain on investors using interest-only loans.
Simultaneously, the Bank of Japan is evaluating its benchmark rate of 1.25%. While many economists expect the next hike in December or January, former executive director Kazuo Momma suggests a 20% to 30% chance of a rate increase in October. This would mark a second consecutive monthly hike, aligning with Governor Kazuo Ueda's shift toward preventing inflation from overshooting the 2% target, a risk highlighted by August data showing a 2.6% gain.
