The Bank of Japan could continue to raise interest rates gradually at a “data-dependent” pace, IMF chief economist Pierre-Olivier Gourinchas told Reuters in an interview at the annual Jackson Hole Economic Symposium on Friday:
- Inflation is above the bank’s 2% target.
- Inflation expectations have started to move “perhaps even slightly above” this target.
- “The Bank of Japan’s beginning to normalize monetary policy is certainly something we think is a good development for Japan.”
Gorinchas also gave his opinion on market volatility:
- “I think the market overreacted.”
- “…we may see further episodes of market volatility” due to interest rate cuts by several central banks as the Bank of Japan begins to raise rates
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I don’t know how much attention the Bank of Japan will pay to his views. But I suspect it won’t.
He’s right about more volatility ahead at least. With Fed Chair Powell confirming a September rate cut:
And the Bank of Japan’s interest rates are rising, and there’s more to come.