BOJ’s Ueda Signals Gradual Rate Hikes as EU Budget Tensions Rise

By / / Breaking News

This update was written automatically with AI from market data and news wire reports, and published without review by a person.

Key Takeaways

  • Bank of Japan (BOJ) Governor Kazuo Ueda reaffirmed the central bank's commitment to raising interest rates if economic and price developments align with forecasts, noting that underlying inflation is nearing the 2% price stability target.
  • Dutch Prime Minister Rob Jetten criticized current EU budget proposals, labeling the Irish Presidency's plan "not good enough" and calling for a leaner, modernized Multiannual Financial Framework (MFF) focused on security and competitiveness.
  • Japan's core CPI is expected to have accelerated to 2.1% in September, potentially exceeding the BOJ's target for the first time since December due to rising energy and food costs.
  • EU "frugal" nations, led by Germany and the Netherlands, are resisting a proposed 50-60% increase in budget contributions, with Sweden's Prime Minister calling such hikes a "no-go zone."
  • A heavy data week lies ahead, featuring China's Q3 GDP, inflation prints from the UK, Canada, and Japan, and global Flash PMI readings.

BOJ Maintains Hawkish Tilt Amid Rising Inflation

Bank of Japan (8301) Governor Kazuo Ueda signaled on Friday that the central bank will continue to raise its policy rate, provided the economy performs as expected. Speaking during the European trading session, Ueda emphasized that financial conditions remains accommodative even as underlying inflation approaches the 2% target.

Market participants are closely watching the upcoming October 29-30 policy meeting, where the BOJ will release updated quarterly growth and inflation forecasts. While a back-to-back rate hike in October is viewed as unlikely by many analysts, swaps markets are currently pricing in an 88% probability of a move by December. Recent data underscores this pressure, with wholesale inflation rising 6.8% year-on-year in September and import prices surging 24.5% due to yen weakness.

EU Budget Deadlock: "Frugals" Demand Modernization

At the European Council summit in Brussels, Dutch Prime Minister Rob Jetten led a chorus of disapproval regarding the EU’s next long-term budget (2028-2034). Jetten argued that the current proposal needs to be "downsized and modernized," rejecting a potential 50% increase in the budget as "simply not viable" for Dutch taxpayers.

The Netherlands, alongside Germany, Austria, Sweden, Denmark, and Finland, forms the "frugal" bloc pushing for a leaner budget that prioritizes competitiveness, security, and future prosperity over traditional spending like the Common Agricultural Policy (CAP). In contrast, the "Friends of Cohesion" group, comprising 17 southern and eastern member states, seeks to protect infrastructure and development funding.

Global Macro Outlook: High-Stakes Data Week

Investors are bracing for a volatile week as a wave of tier-one economic data hits the tape. Key highlights include China’s Q3 GDP, which will provide a critical health check on the world's second-largest economy amid persistent deflationary concerns.

In the West, UK CPI, jobs, and retail sales data will be pivotal for the Bank of England's next move, while Canada and Japan are also set to release inflation figures. Global Flash PMIs at the end of the week will offer the first look at economic momentum heading into the final quarter of 2026. Market sentiment remains cautious as central banks navigate the "higher-for-longer" narrative while balancing growth risks.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. We are not financial professionals. The authors and/or site operators may hold positions in the companies or assets mentioned. Always do your own research before making financial decisions.
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