Bloomberg on the outcome of the BoJ Bank of Japan’s monetary policy meeting.
The Bank of Japan kept its policy rate unchanged Friday after its monetary policy meeting, holding its benchmark policy rate at 0%-0.1%. This is in line with expectations from economists polled by Reuters. While the move was expected, this comes after Tokyo’s April inflation came in lower than expected, with the core inflation rate at 1.6% compared to expectations of 2.2% from Reuters. The BOJ also said it will continue to conduct bond purchases. However, they dropped a reference to buying roughly the same amount of bonds as previously. No comment was made by the BOJ on the yen, which has steadily weakened since the BOJ ended its negative interest rate policy last month and abolished its yield curve control policy. The currency broke through the 156 mark against the U.S. dollar Friday after the decision, most recently trading at 156.11. Separately, the central bank also released its second-quarter outlook for Japan’s economy, raising its outlook for inflation in fiscal 2024. The BOJ now expects inflation between 2.5% and 3% for fiscal 2024, up from 2.2% to 2.5% in its January forecast. Inflation is then predicted to decelerate to “around 2%” in fiscal 2025 and 2026, the bank added. The BOJ also downgraded gross domestic product growth forecasts for fiscal 2024 to a range of 0.7% to 1%, down from January’s prediction of 1%-1.2% growth. Think of this as another small step in what the BoJ sees as a relatively long policy normalization journey. As mentioned by Mohamed El Erian, the length of this journey, both on a standalone basis and relative to the US, helps explain the weak Yen. Source: Bloomberg, CNBC
SNB’s Jordan Warns New Inflation Shocks Could Hit "At Any Time"
Speaking in Bern this morning, Jordan said: “We will therefore monitor the ongoing development of inflation closely and adjust our monetary policy again if necessary.” and also cautioned there’s “no guarantee” that the current favorable consumer-price outlook will hold.
Source: Bloomberg
Prediction markets now show a 36% chance of ZERO interest rate cuts in 2024, according to Kalshi.
To put this in perspective, 4 months ago there was a ~3% chance of no rate cuts in 2024. The base case has gone from 6 rate cuts to 1 rate cut this year. There is just a 31% chance of 2 or more interest rate cuts this year. In other words, there is a higher chance of NO cuts than 2 OR MORE cuts. Could it be the fastest shift in Fed expectations of all time? Source: The Kobeissi Letter
Excellent tweet by Otavio (Tavi) Costa on how money debasement looks like and why the BoJ is "trapped” in one chart.
"Japan is experiencing increasing inflation expectations alongside a continuous devaluation of the yen, exhibiting an almost perfectly negative correlation. This reflects the dilemma of an economy burdened by excessive debt, necessitating continuous accommodative monetary policies in the face of structural inflationary pressures. While this might be more pronounced in Japan, this trend is reflective of a global fiat debasement phenomenon". Source: Crescat Capital, Tavi Costa
Central banks are STOCKING UP on gold:
Since 2022, China has bought a record ~290 tonnes of gold. Last year alone, China acquired more than 225 tonnes of the metal. China's central bank increased its gold holdings for 17 straight months. In 2022 and 2023, world central banks bought 1081 and 1037 tonnes of gold, respectively. Prior to 2022, there was never a year in history with 1,000+ tonnes of central bank gold purchases. Source: The Kobeissi Letter, BofA
What a difference five months makes for the Fed rate cut outlook. 😉
Source: Bloomberg Intelligence, Markets & Mayhem
Federal Reserve posted its biggest loss in history of $114 billion last year 👀
Source: Yahoo Finance
2022-2024 summarised in one cartoon
Thru Andreas Steno Larsen
