The GBP/JPY currency pair has remained in a sideways movement above the 182.00 level, despite the Bank of Japan (BoJ) releasing its Summary of Opinions, which emphasized the necessity of further monetary policy easing to achieve a consistent inflation rate above 2%.
According to the BoJ Summary of Opinions, it is deemed premature to alter the current policy stance, as smaller businesses show a growing inclination towards raising wages and increasing investments.
This viewpoint was reported by Reuters. The BoJ acknowledges the importance of focusing on wage-driven inflation rather than relying solely on cost-driven inflation to achieve sustainable 2% inflation.
However, one of the policymakers expressed support for an early adjustment of the Yield Curve Control (YCC) to prevent sudden fluctuations in interest rates. This statement contrasts with BoJ Governor Kazuo Ueda’s belief that the current interest rate policy should remain unchanged in the pursuit of stable 2% inflation.
Meanwhile, market expectations for the Pound Sterling suggest a potential upward trend, given the recent substantial increase in interest rates by the Bank of England (BoE) aimed at curbing inflationary pressures.
Headline inflation in May exceeded expectations, with food inflation remaining at levels not seen in 45 years. Additionally, core inflation reached a new high of 7.1%, bolstered by tight labor market conditions.
Both UK Prime Minister Rishi Sunak and BoE Governor Andrew Bailey are growing uneasy as core inflation moves in an undesirable direction despite the consistent tightening of monetary policy by the central bank. Investors anticipate that the goal of halving inflation in the United Kingdom by the end of the year, as promised by PM Rishi Sunak, may not be achieved.
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