Heteronomics Archive

January 24, 2025

Japan: 25bp Rate Hike To 0.5% (Consensus 0.5%) in Jan-25

The BoJ raised its policy rate by 25 basis points to 0.5%, consistent with market expectations and reflecting a gradual recalibration of monetary policy as inflationary pressures stabilise near 2.5–3.0% in the medium term.
Persistent wage growth, yen depreciation, and improving labour market conditions underpin inflation forecasts. However, due to commodity price volatility and exchange rate sensitivity, inflation risks are tilted to the upside.
While financial conditions remain accommodative, future rate hikes are likely if inflation expectations and wage-price dynamics sustain alignment with the BoJ’s medium-term stability target of 2%.

January 23, 2025

The Norges Bank kept the policy rate unchanged at 4.5%, in line with expectations, and reiterated its guidance for a potential reduction in March as inflation moderates further.
Inflation has decelerated faster than anticipated, with headline CPI at 2.2% in December, though core inflation remains above target due to persistent wage growth and high business costs.
External factors, including rising policy rate expectations among trading partners and potential trade barriers, alongside domestic economic resilience, will influence the timing and magnitude of future rate adjustments.

January 22, 2025

Bank Negara Malaysia maintained the Overnight Policy Rate at 3%, consistent with consensus expectations, citing sustained economic growth and manageable inflationary pressures. The decision reflects a balanced approach amid moderating global inflation and easing monetary policy conditions globally.
Domestic growth remains resilient, driven by robust investment and household spending, but risks such as a potential global slowdown, trade restrictions, and commodity production volatility could weigh on the outlook. Upside growth potential exists from stronger spillovers in technology, tourism, and faster investment execution.
Inflation is expected to remain contained in 2025, supported by easing cost pressures, though spillover effects from domestic policies and fluctuations in commodity prices could introduce upside risks. The MPC’s vigilant, data-driven approach underscores its commitment to sustainable growth and price stability.

January 16, 2025

The Bank of Korea maintained its base interest rate at 3.00%, defying market expectations of a 25bp cut, citing stabilising inflation and heightened risks from domestic political instability and exchange rate volatility.
Domestic economic recovery remains fragile, with weak consumption and investment trends, while external challenges, including US protectionist policies and strong dollar dynamics, further constrain growth prospects, projected at 1.9% for 2025.
Future rate cuts will depend on balancing inflationary stability, financial risks, and economic uncertainties, with the Bank signalling a cautious approach to monetary easing amid volatile domestic and international conditions.