16.06.2026 - BoJ: Rate Hike
Last night, Japan's central bank raised its policy rate to 1.0%, in line with economists' expectations. It marks the highest level since 1995 and represents another step in the policy normalization process that began in 2024.
Meanwhile, the Reserve Bank of Australia (RBA) left its benchmark rate unchanged at 4.35%.
Markets:
Equities: broadly green
Bonds: yields lower - US 10y 4.45%, Japan 10y 2.65%
Commodities: Oil prices continue to decline - WTI: USD 78/barrel, Brent: USD 81; Precious metals stable with gold USD 4340 - silver USD 70
Currencies: no major moves
Cryptos: higher with Bitcoin reaching USD 67k
Volatility: falls to 16
My View: Last night, Japan's central bank raised its policy rate to 1.0%, in line with economists' expectations. It marks the highest level since 1995 and represents another step in the policy normalization process that began in 2024.
Meanwhile, the Reserve Bank of Australia (RBA) left its benchmark rate unchanged at 4.35%.
Markets:
Equities: broadly green
Bonds: yields lower - US 10y 4.45%, Japan 10y 2.65%
Commodities: Oil prices continue to decline - WTI: USD 78/barrel, Brent: USD 81; Precious metals stable with gold USD 4340 - silver USD 70
Currencies: no major moves
Cryptos: higher with Bitcoin reaching USD 67k
Volatility: falls to 16
My View: Following last week's ECB rate hike, we are now seeing another major central bank moving further along the tightening path. Besides addressing inflation concerns, the Bank of Japan is also seeking to provide support for the yen, which has remained under pressure.
The 25-basis-point hike itself is not the real game changer. What matters much more is the future path of interest rates. In the short term, lower oil prices are providing some relief and easing inflation concerns. It remains to be seen whether this trend will continue.
I also remain skeptical about the prospects for a lasting agreement with Iran. In my view, President Trump has mainly gained another 60 days, but the underlying issues remain unresolved and a comprehensive deal is still far from certain.
The key event this week will be tomorrow's Federal Reserve decision and the first press conference by the new Fed Chair, Kevin Warsh.
In line with market expectations, I do not expect a rate hike. However, the tone set by the new Fed Chair will be closely watched. Markets will be looking for clues on the future path of monetary policy and whether the Fed remains primarily focused on fighting inflation or becomes increasingly concerned about slowing economic growth.
Historically, markets have often tested incoming Fed Chairs, while midterm election years have tended to be more challenging for equities. At the same time, investors have become accustomed to policy support and increasingly aggressive attempts by politicians and policymakers to calm markets and sustain confidence.
This creates a dangerous environment. The stronger and faster markets are pushed higher, the greater the risk that any reversal could be equally rapid. History shows that highly concentrated and policy-supported rallies can unwind much faster than they were built, with declines extending far beyond what most investors initially anticipate.
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