Amid Broad Inflation, Hopes for US and Japan Rate Cuts Fade

U.S. Consumer Inflation Rate
Expected to Exceed 4% for the First Time in Three Years
"Not Simply an Energy Issue"

Japan Signals Rate Hike This Month
Interest Rate Projected to Reach Highest Level in 31 Years

The monetary policy stance of major central banks, including those in the United States and Japan, is tilting toward a hawkish (preference for monetary tightening) approach. In the United States, expectations for a policy rate cut have diminished as the Consumer Price Index (CPI) inflation rate for May is projected to exceed 4% for the first time in three years. In Japan, where a policy rate hike is anticipated this month, forecasts indicate that the country will record its highest interest rate (1%) in 31 years.

Kevin Wash, Chair of the U.S. Federal Reserve (Fed). Photo by AP Yonhap News

The U.S. Bureau of Labor Statistics (BLS) will announce the May CPI at 8:30 a.m. on June 10 (Eastern Time; 9:30 p.m. Korea time). This is one of the key economic indicators referenced by the Federal Reserve (Fed), which has set an official inflation target of 2%.

The market expects the CPI inflation rate to exceed 4%. Financial information provider FactSet has forecast that the May CPI will rise by 4.2% year-on-year. This is higher than April's 3.8% and is the highest figure since April 2023 (4.9%). The core CPI, which excludes food and gasoline prices, is expected to rise slightly to 2.9%, compared to the previous month's figure of 2.8%.

According to CNBC, Wall Street views this data as reflecting a continued upward trend in prices. Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, stated, "This is not simply an energy issue but rather a broader inflation problem," adding, "It suggests that we are likely still facing a degree of sticky inflation." She further noted, "If the results are worse than expected, the stock market will not welcome it."

The Trump Administration has argued that inflation will quickly decline once the Middle East conflict subsides. Ahead of the Federal Open Market Committee (FOMC) meeting scheduled for June 16-17, U.S. President Donald Trump pressed, "Raising the policy rate is a mistake," and insisted, "Instead, rates should be lowered." This meeting will be the first to be chaired by Federal Reserve Chairman Kevin Warsh, who was nominated by President Trump.

Japan is facing a similar situation. The Bank of Japan (BOJ) is expected to raise its policy rate at the Monetary Policy Meeting scheduled for June 15-16. According to a Bloomberg survey of 51 economists, released on June 10, 49 respondents anticipated that the BOJ would raise the rate by 0.25% at this month's meeting. Respondents also projected that the year-end rate will reach 1.25%, implying the possibility of one more rate hike within the year.

If the BOJ raises rates at this meeting, it will mark the first increase in approximately six months since December last year. The current rate has remained unchanged at around 0.75% throughout this year. In this scenario, the policy rate would reach 1%, the highest level in 31 years since 1995. On June 3, BOJ Governor Kazuo Ueda indicated, "Even with uncertainty in the Middle East, it is necessary to thoroughly discuss the appropriateness of a rate hike."

A BOJ official told the Nikkei newspaper that "companies are passing on costs more quickly. If the timing is missed, a substantial rate hike may be needed later." The official added that, as the downside risk to the economy from Middle East tensions is limited, there is a growing view that a rate hike is necessary to address inflationary risks.

This content was produced with the assistance of AI translation services.