Markets Shouldn't Take BOJ Rate Hikes for Granted

Dow Jones10-29 15:57

0757 GMT - Japan's central bank is widely expected to stand pat Friday, putting a sharper-than-usual focus on its communication. The BOJ has the inflation evidence it needs to sound hawkish this week, but not the growth evidence that would make the next rate hike inevitable, says Krishna Bhimavarapu at State Street Investment Management. A materially hawkish message risks pushing markets towards pricing faster normalization and earlier hikes, potentially getting ahead of both growth data and the government's more cautious assessment of the economy, Bhimavarapu says. State Street continues to expect two more BOJ rate hikes over the next 9 months, but warns that conviction in the direction of policy shouldn't be confused with certainty over the timing, viewing the December meeting as live.

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