In the latest monetary policy news, the Federal Reserve slashed key interest rates for the third time this year. This decision moved the equity securities market. At the same time, the Bank of Japan came in with the news that it would hold key rates steady.
The market expected the move, which saw the Fed slashing rates to the 1.5% to 1.75% range yesterday. However, the US central bank indicated that it would pause the monetary easing cycle before hiking them again.
In the July and September meetings, Fed Chairman Jerome Powell said that the bank did not plan to do a long easing cycle.
In his own words, Powell believes that the policy is in a good place. He added that the current status of the policy remains appropriate.
At present, the US Federal Reserve expects moderate economic growth and an active labor market. It also expects inflation to move back up to its 2% annual target.
Bank of Japan’s Monetary Policy
Meanwhile, the Bank of Japan decided to keep its policy steady. The markets also widely expected this move.
The difference is that the BOJ signaled that it might cut interest rates in the future. It cited concerns that risks abroad could dampen the recovery of the Asian economy.
The short-term rate target is now at -0.1%. Also, the 10-year government bond yield sits around 0%.
In its latest decision, the BOJ also reaffirmed its pledge to purchase government bonds. That means its holdings increase at an annual pace of around 80 trillion yen, or $736 billion.
On the economic front, data recently showed the country’s industrial output rebounded in September. Retail sales, meanwhile, gained the most in more than five years.
However, exports continued to decline. At the same time, a sales tax increase this month also triggered concerns that Japan could enter a recession.