“These forecasts have been abysmal. My dots wouldn’t be perfect either, so I wouldn’t give them.”
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Source: The Market Mind
49 of 51 economists surveyed by Bloomberg expect the BOJ to raise its key interest rate by +25 basis points to 1.0% at its June 15-16 policy meeting. This would mark the highest level since 1995 and the first time above 1.0% in more than 3 decades. The same survey shows economists expecting a further hike to 1.25% by year-end, implying 2 rate increases in 2026 alone, with ~71% expecting hikes roughly once every 6 months. This comes as the Iran war-driven energy shock has pushed Japanese inflation risks higher, with 60% of survey respondents flagging a rising risk of the BOJ falling behind the curve in fighting inflation. The BOJ's decision on its government bond purchase reduction program will also be closely watched, with the majority of analysts expecting the central bank to slow or pause its tapering from April 2027. The Bank of Japan is gradually closing the gap with other major central banks. Source: Global Markets Investor, Bloomberg
The ECB lifted its main refinancing rate to 2.40% and its deposit facility rate to 2.25%, citing inflation pressures following an Iran conflict-driven energy shock that pushed eurozone inflation to 3.2%. The surprise move comes as the eurozone economy shows signs of weakness, with GDP contracting 0.2% in Q1. Policymakers said the hike is aimed at preventing higher energy prices from becoming embedded in broader inflation. While this may draw criticism from some given the current growth context, the Bank actually has little choice. Unlike the Fed’s dual mandate of inflation and employment, the ECB has a single mandate: price stability. Note a big jump in the ECB's 26/27 inflation forecasts, offset by a drop in GDP forecasts HICP 2026: 3.0%, from 2.6% in March HICP 2027: 2.3%, from 2.0% HICP 2028: 2.1%, from 2.0% GDP 2026: 0.8%, from 0.9% GDP 2027: 1.2%, from 1.3% GDP 2028: 1.5%, from 1.4%