Central bankers who orchestrated the wave of interest rate hikes over the past two years, hoping to avoid a painful inflationary spiral, are now facing an uncomfortable question: Were their moves helpful?-
Some proponents of the rate hikes argue that regardless of the source of inflation, unless central bankers showed they were serious about tackling it, expectations of persistent and widespread price increases would only grow.
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The dollar index is up 0.9% to 103.4 on the week and at 148.12 yen the dollar is up almost 5% on the Japanese currency this year as confidence that the Bank of Japan (BOJ) is about to hike rates has also been rattled. Data on Friday showed Japan's core inflation slowed to 2.3% in the year to December, its lowest annual pace since June 2022 - seemingly vindicating policymakers' wait-and-see approach. "The market's realisation that rates hikes will not be easy for the BOJ in the coming months and the coincident repricing of Fed rate cut risks have already been reflected in the move higher in dollar/yen," said Rabobank strategist Jane Foley.