The BOJ maintained the 0.1 percent negative interest rate for some of the excess reserves that financial institutions park with the central bank.
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They also projected a less aggressive rise in rates both next year and in 2018, according to the median projection of forecasts released with the statement. Some analysts show concerns that the government-bond market can’t be fully controlled by an official entity as BOJ may run out of bonds to buy.
Oil prices climbed on Wednesday after another weekly drop in US crude inventory. Perhaps the real news is the Bank of Japan’s own efforts. “I think they’ve come to realize they can not effectively weaken the yen anymore, so they shifted their focus to supporting the banking and insurance sectors”. The central bank’s decision to cut rates to minus 0.1 percent in January set off a rout in banking stocks and a flight to the safety of the yen.
Atlanta Fed President Dennis Lockhart said last week there should be a “serious discussion” about a rate hike at this week’s meeting, while San Francisco Fed President John Williams, seen as a close Yellen ally, said two weeks ago that he would prefer to raise rates “sooner rather than later”.
Although most traders expect the USA central bank to hold back from raising interest rates this month, any comments regarding the Fed’s future policy moves will be closely watched. That will likely on Wednesday be cut to one.
The US dollar index, which measures the greenback against a basket of six other major currencies, extended its decline to a five-day low of 95.515, off more than 0.50 per cent.
The Fed’s announcement further dims the outlook for the dollar after a 20 percent surge since the middle of 2014 gave way to a 4 percent slide this year in the run-up to the decision.
He suggested the European Central Bank, which has also been pursuing a policy of ultra-low interest rates and massive purchases of bonds, could adopt a similar policy to reduce pressure on banks.
The “new framework” to strengthen monetary easing also commits the Bank of Japan to pushing past the 2 percent inflation target it set more than three years ago.
“The dollar is going to suffer”, said Win Thin, global head of emerging markets at Brown Brothers Harriman & Co.in NY.
Oil climbed 2.9 percent in NY. The American Petroleum Institute revealed a 7.5 million barrel fall in USA crude inventories to 507.2 million barrels last week, compared to an estimated increase of 2.8 million barrels.
Gasoline stocks fell by 3.2 million barrels, compared with expectations of a 567,000 barrels drop.
On Wednesday afternoon, we’ll know whether Federal Reserve has chose to raise interest rates again for the first time since last December.
“The inventory number is quite bullish”, said Cavan Yie, senior equity analyst at Manulife Asset Management Ltd.in Toronto. Brent crude futures rose 0.8 per cent to US$47.23, adding to gains of 2.1 per cent on Wednesday. Total volume traded was about 10 percent above the 100-day average.
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