Bank of Japan (BOJ) — July 28, 2025: Latest Overview
Policy Rate and Recent Moves
Short-term policy rate: Remains at 0.5%, the highest since 2008.
Decision timing: This rate was set in January 2025 (up from 0.25%) and has been maintained
Policy Outlook and Economic Backdrop
Inflation: Tokyo's core CPI is running above the BOJ’s 2% target (2.9% YoY in July), primarily due to external price pressures like energy and currency movements, not strong domestic demand.
Growth trends: The BOJ has trimmed its growth outlook, noting headwinds from higher U.S. tariffs and yen weakness, but still expects a moderate recovery if global trade remains stable.
Bond Purchases: The BOJ is scaling back its massive holdings of Japanese government bonds—targeting a 400 billion yen quarterly reduction through March 2026, then lowering to 200 billion yen in subsequent quarters.
Potential rate path: Market consensus and BOJ commentary indicate a possible hike to at least 0.75% by year-end 2025 if above-target inflation persists and downside global risks do not intensify.
Key Drivers and Central Bank Signals
U.S.-Japan trade: The new trade pact has reduced some uncertainties, supporting the possibility of policy tightening if inflation and yen trends remain stable.
Inflation’s nature: The BOJ stresses that any additional rate hikes will depend on seeing sustained, demand-driven price increases and wages, rather than just external cost pressures.
Governor Ueda’s message: The BOJ is maintaining a cautious, data-dependent approach, prioritizing stability and careful evaluation of global and domestic risk factors.
Quick Fact Table
Indicator Latest (July 2025) BOJ’s Signal
Policy Rate 0.5% Steady for now; another hike possible in 2025
Tokyo Core CPI (YoY) 2.9% Sustainable above-target inflation
Next Meeting July 30–31 Hawkish bias; likely no immediate change
Bonds (JGB reduction) -400B yen/Q Gradual unwinding through March 2026
Rate Outlook Stable, with upside Hike to 0.75% possible by year-end if justified
Summary:
The BOJ remains in a cautious, data-driven policy stance at 0.5% as of late July 2025, with inflation still above target and moderate growth. The central bank is slowly reducing bond purchases and may raise rates again by year-end if the current economic trends persist, but no change is expected at the imminent July meeting.
European Central Bank (ECB) — July 2025: Latest Policy and Economic Update
Key Interest Rates and Current Stance
Deposit Facility Rate: 2.00%
Main Refinancing Operations (MRO) Rate: 2.15%
Marginal Lending Facility Rate: 2.40%
These rates were set after a 25 basis point cut in early June 2025 and have now been held steady as of the ECB’s July 24, 2025 meeting.
Monetary Policy Context
Policy Pause: The ECB ended a year-long easing cycle which saw rates cut from 4% to 2%. The current pause reflects the ECB’s “wait-and-see” approach as inflation has now stabilized at its 2% target and global trade tensions—especially over U.S. tariffs—add significant uncertainty.
No Commitments: The Governing Council is explicitly not pre-committing to any future rate path, emphasizing a data-dependent, meeting-by-meeting stance.
Asset Purchases: The ECB’s asset purchase programme (APP) and the pandemic emergency purchase programme (PEPP) portfolios are being reduced gradually, with no reinvestment of maturing securities.
Inflation and Economic Outlook
Inflation: Now at 2% (its target). The ECB expects it to remain near target for the period ahead. Wage growth continues but is slowing, and underlying price pressures are easing.
Ecoomic Growth: The eurozone economy grew more strongly than expected in early 2025, but trade uncertainty and a stronger euro are holding back business investment and exports. Higher government spending, especially on defense and infrastructure, is expected to support growth over the medium term.
Loans and Credit: Borrowing costs are at their lowest since late 2022. Households are benefiting from strong labor markets and growing wages, but banks are cautious in their lending due to uncertainty and global trade tensions.
Risks and Forward Guidance
The ECB is focused on safeguarding price stability amid exceptional uncertainty due to global trade disputes and policy risks.
There is no forward guidance for the next rate change. Markets are pricing only one possible additional cut for 2025, and a potential return to tightening in late 2026 if inflation stays below target.
Summary Table: ECB at a Glance (July 2025)
Policy Rate 2.15%
Deposit Rate 2.00%
Marginal Lending 2.40%
Inflation (Jun 25) 2% (target achieved)
GDP Growth (2025) 0.9% (projected)
Policy bias Cautious, data-dependent pause
The ECB’s current stance is one of caution, monitoring the effects of prior easing and global trade risks while inflation stabilizes at target. No further near-term cuts are planned unless significant data surprises emerge. The approach is flexible, with decisions made meeting-by-meeting in response to evolving economic and financial conditions.
Policy Rate and Recent Moves
Short-term policy rate: Remains at 0.5%, the highest since 2008.
Decision timing: This rate was set in January 2025 (up from 0.25%) and has been maintained
Policy Outlook and Economic Backdrop
Inflation: Tokyo's core CPI is running above the BOJ’s 2% target (2.9% YoY in July), primarily due to external price pressures like energy and currency movements, not strong domestic demand.
Growth trends: The BOJ has trimmed its growth outlook, noting headwinds from higher U.S. tariffs and yen weakness, but still expects a moderate recovery if global trade remains stable.
Bond Purchases: The BOJ is scaling back its massive holdings of Japanese government bonds—targeting a 400 billion yen quarterly reduction through March 2026, then lowering to 200 billion yen in subsequent quarters.
Potential rate path: Market consensus and BOJ commentary indicate a possible hike to at least 0.75% by year-end 2025 if above-target inflation persists and downside global risks do not intensify.
Key Drivers and Central Bank Signals
U.S.-Japan trade: The new trade pact has reduced some uncertainties, supporting the possibility of policy tightening if inflation and yen trends remain stable.
Inflation’s nature: The BOJ stresses that any additional rate hikes will depend on seeing sustained, demand-driven price increases and wages, rather than just external cost pressures.
Governor Ueda’s message: The BOJ is maintaining a cautious, data-dependent approach, prioritizing stability and careful evaluation of global and domestic risk factors.
Quick Fact Table
Indicator Latest (July 2025) BOJ’s Signal
Policy Rate 0.5% Steady for now; another hike possible in 2025
Tokyo Core CPI (YoY) 2.9% Sustainable above-target inflation
Next Meeting July 30–31 Hawkish bias; likely no immediate change
Bonds (JGB reduction) -400B yen/Q Gradual unwinding through March 2026
Rate Outlook Stable, with upside Hike to 0.75% possible by year-end if justified
Summary:
The BOJ remains in a cautious, data-driven policy stance at 0.5% as of late July 2025, with inflation still above target and moderate growth. The central bank is slowly reducing bond purchases and may raise rates again by year-end if the current economic trends persist, but no change is expected at the imminent July meeting.
European Central Bank (ECB) — July 2025: Latest Policy and Economic Update
Key Interest Rates and Current Stance
Deposit Facility Rate: 2.00%
Main Refinancing Operations (MRO) Rate: 2.15%
Marginal Lending Facility Rate: 2.40%
These rates were set after a 25 basis point cut in early June 2025 and have now been held steady as of the ECB’s July 24, 2025 meeting.
Monetary Policy Context
Policy Pause: The ECB ended a year-long easing cycle which saw rates cut from 4% to 2%. The current pause reflects the ECB’s “wait-and-see” approach as inflation has now stabilized at its 2% target and global trade tensions—especially over U.S. tariffs—add significant uncertainty.
No Commitments: The Governing Council is explicitly not pre-committing to any future rate path, emphasizing a data-dependent, meeting-by-meeting stance.
Asset Purchases: The ECB’s asset purchase programme (APP) and the pandemic emergency purchase programme (PEPP) portfolios are being reduced gradually, with no reinvestment of maturing securities.
Inflation and Economic Outlook
Inflation: Now at 2% (its target). The ECB expects it to remain near target for the period ahead. Wage growth continues but is slowing, and underlying price pressures are easing.
Ecoomic Growth: The eurozone economy grew more strongly than expected in early 2025, but trade uncertainty and a stronger euro are holding back business investment and exports. Higher government spending, especially on defense and infrastructure, is expected to support growth over the medium term.
Loans and Credit: Borrowing costs are at their lowest since late 2022. Households are benefiting from strong labor markets and growing wages, but banks are cautious in their lending due to uncertainty and global trade tensions.
Risks and Forward Guidance
The ECB is focused on safeguarding price stability amid exceptional uncertainty due to global trade disputes and policy risks.
There is no forward guidance for the next rate change. Markets are pricing only one possible additional cut for 2025, and a potential return to tightening in late 2026 if inflation stays below target.
Summary Table: ECB at a Glance (July 2025)
Policy Rate 2.15%
Deposit Rate 2.00%
Marginal Lending 2.40%
Inflation (Jun 25) 2% (target achieved)
GDP Growth (2025) 0.9% (projected)
Policy bias Cautious, data-dependent pause
The ECB’s current stance is one of caution, monitoring the effects of prior easing and global trade risks while inflation stabilizes at target. No further near-term cuts are planned unless significant data surprises emerge. The approach is flexible, with decisions made meeting-by-meeting in response to evolving economic and financial conditions.
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.