BoJ’s Ueda: There are many issues that need to be better understood regarding inflation expectations
|"Whether inflation is caused by demand or supply has very important implications for monetary policy making," said Bank of Japan (BoJ) Governor Kazuo Ueda said on Wednesday.
Additional comments
In response to supply-driven inflation, central banks' decision making faces the difficult dilemma between considerations of economic activity and the need to tackle surging inflation.
Increase in inflationary pressure has been caused by supply factors such as a rapid rise in commodity prices, labour shortages, and disruptions to supply chains.
Recent global inflation has also been influenced by demand factors, including the effects of expansionary fiscal and monetary policy measures and the pent-up demand after the spread of pandemic.
In light of these points, it is extremely important to carefully analyse various indicators and examine the underlying trend in prices.
Market participants, firms, and households all have different expectations formation, given different perceptions of current inflation.
Inflation expectations are susceptible to the influence of their experience or psychological conditions, as well as to the central bank's communication.
It may be difficult to deny the possibility that we are already in a new normal that is different from the period of 'low for long' inflation.
As a result of increases in the variety of tool kits and also advances in monetary policy making, central banks need to be more careful about how they communicate.
In scheduled policy review, BoJ will review the interaction between measures it took and economic activity, prices, and financial conditions, and the positive effects and the side effects, drawing on the knowledge in Japan and abroad.
USD/JPY grinds below 140.00
Following the news, USD/JPY initially refreshed intraday high to 139.92 before retreating of late.
Also read: USD/JPY consolidates below 140.00, downside seems favored ahead of US labor market data
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.