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BOJ Maintains Monetary Policy, Brazil Raises Interest Rates to Double Digits

Masazumi Wakatabe, deputy governor of the Bank of Japan (BOJ), said today that it is too early to normalize monetary policy at this stage. This is because the Japanese economy has only just recovered from the damage caused by the COVID-19 pandemic.

“The BOJ’s pre-inflationary tightening of monetary policy is too early. because it will undermine the country’s economic recovery,” Wakatabe said.

That said, Wakatabe expressed the need for the BOJ to maintain its massive stimulus program as inflation expectations have not risen to the BOJ’s 2% target.

“Consumer inflation could rise to about 1% over the coming months and it could rise more than expected. As more companies start raising prices, households have to bear higher costs.”

Meanwhile, Brazil’s central bank raised interest rates for the first time in five years to 1.5% in hopes of curbing inflation.

The Monetary Policy Committee of the Central Bank of Brazil (Copom) raised the key interest rate (Selic) by 1.5% from 9.25% to 10.75% at its meeting today.

The rate hike was in line with financial market expectations. It is the first time since 2017 that Brazil’s key interest rate has reached double digits.

The Brazilian central bank said the interest rate hikes at the meeting were aimed at curbing the rise in inflation. At the end of 2021, the inflation rate in Brazil was 10.06%, the highest level since 2015, and inflationary pressures remain very high.

Brazilian inflation is expected to hover around 5.4% and 3.5% in 2022 and 2023, respectively.

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