Bank of Japan meeting, Federal Reserve FOMC review
2024-03-22
■ The Bank of Japan has decided to adjust its policies, emphasizing the continued relaxation of the financial environment
■ The Federal Reserve has raised its economic and inflation expectations but maintained its expectation of three rate cuts this year
On the 20th, the Bank of Japan decided to normalize monetary policy, believing that a good cycle of wages and prices has been confirmed, and judging the sustained achievement of foreseeable price stability goals. The Bank of Japan has adjusted the hierarchical structure of daily deposits from 3 levels to 2 and lifted negative interest rates. They adjusted the required reserve interest rate to zero, the excess reserve interest rate to 0.1%, and changed the policy interest rate to unsecured overnight funding, requiring it to fluctuate within the range of 0 to 0.1%. In addition, they abandoned the long-term and short-term interest rate control (YCC) policy, allowing the market's real interest rate to fluctuate, but will continue to buy long-term treasury bonds of roughly the same amount as before, and said that if long-term interest rates rise sharply, they will respond flexibly. In addition, they have ended new purchases of publicly traded funds (ETFs) and real estate investment trusts (J-REITs) and cancelled overshoot commitments related to monetary base balances. The policy adjustment content meets market expectations, and the statement points out that "under the current economic and price expectations, a loose financial environment will continue to exist." Therefore, after the announcement, the financial market experienced a reaction of yen depreciation and a stock market rise. Bank of Japan President Yoshida stated at a press conference that in the future they will set appropriate interest rates based on economic and price conditions, and will need to explore the prospects of monetary policy in terms of price-related statistics and wage growth rates.
The Federal Reserve held a Federal Open Market Committee (FOMC) meeting from the 20th to the 21st and decided to maintain the guidance target of the federal funds rate at 5.25-5.50%. The statement continued the content of the FOMC in December last year, believing that it is not appropriate to cut interest rates for the time being while employment and inflation remain stable. While raising economic and inflation expectations, the number of interest rate cuts expected in 2024 remains at three. In addition, the expected times in 2025 and 2026 were adjusted from 4 to 3 times respectively, and the medium- and long-term outlook (longer run) was also raised from 2.500% to 2.625%. Federal Reserve Chairman Jerome Powell said at a press conference that he recognized that curbing inflation is a tortuous task, pointed out that he would not pay too much attention to the recent rise in inflation-related statistics, and again expressed that it is appropriate to cut interest rates this year. They expect rate cuts to begin in the second quarter and plan to do so at a moderate pace of 25 basis points per quarter. In addition, they maintained a policy of reducing their asset holdings by up to $95 billion per month. However, Chairman Powell believes that the pace of asset reductions (quantitative tightening, QT) should be slowed as quickly as possible to avoid short-term financial market stress.
■ The Federal Reserve has raised its economic and inflation expectations but maintained its expectation of three rate cuts this year
On the 20th, the Bank of Japan decided to normalize monetary policy, believing that a good cycle of wages and prices has been confirmed, and judging the sustained achievement of foreseeable price stability goals. The Bank of Japan has adjusted the hierarchical structure of daily deposits from 3 levels to 2 and lifted negative interest rates. They adjusted the required reserve interest rate to zero, the excess reserve interest rate to 0.1%, and changed the policy interest rate to unsecured overnight funding, requiring it to fluctuate within the range of 0 to 0.1%. In addition, they abandoned the long-term and short-term interest rate control (YCC) policy, allowing the market's real interest rate to fluctuate, but will continue to buy long-term treasury bonds of roughly the same amount as before, and said that if long-term interest rates rise sharply, they will respond flexibly. In addition, they have ended new purchases of publicly traded funds (ETFs) and real estate investment trusts (J-REITs) and cancelled overshoot commitments related to monetary base balances. The policy adjustment content meets market expectations, and the statement points out that "under the current economic and price expectations, a loose financial environment will continue to exist." Therefore, after the announcement, the financial market experienced a reaction of yen depreciation and a stock market rise. Bank of Japan President Yoshida stated at a press conference that in the future they will set appropriate interest rates based on economic and price conditions, and will need to explore the prospects of monetary policy in terms of price-related statistics and wage growth rates.
The Federal Reserve held a Federal Open Market Committee (FOMC) meeting from the 20th to the 21st and decided to maintain the guidance target of the federal funds rate at 5.25-5.50%. The statement continued the content of the FOMC in December last year, believing that it is not appropriate to cut interest rates for the time being while employment and inflation remain stable. While raising economic and inflation expectations, the number of interest rate cuts expected in 2024 remains at three. In addition, the expected times in 2025 and 2026 were adjusted from 4 to 3 times respectively, and the medium- and long-term outlook (longer run) was also raised from 2.500% to 2.625%. Federal Reserve Chairman Jerome Powell said at a press conference that he recognized that curbing inflation is a tortuous task, pointed out that he would not pay too much attention to the recent rise in inflation-related statistics, and again expressed that it is appropriate to cut interest rates this year. They expect rate cuts to begin in the second quarter and plan to do so at a moderate pace of 25 basis points per quarter. In addition, they maintained a policy of reducing their asset holdings by up to $95 billion per month. However, Chairman Powell believes that the pace of asset reductions (quantitative tightening, QT) should be slowed as quickly as possible to avoid short-term financial market stress.