Pensioners cannot withstand inflation... the serious circumstances behind the Fed and the Bank of Japan rushing to raise rates

The market has taken Federal Reserve Chair Warsh's remarks at the Jackson Hole meeting, which suggested the possibility of additional measures to ensure price stability, as significantly raising the probability of a September rate hike. Pricing in interest rate futures has exceeded 60%, strengthening the prospects of a September hike.

Meanwhile, at a speech in Saitama, Bank of Japan Deputy Governor Himino Ryozo (氷見野良三) suggested that the September Monetary Policy Meeting could be live, and the Bank of Japan is also seen as likely to discuss a rate hike and other issues at its 17–18 September meeting. The market is moving on the assumption of a September hike, with attention concentrated on further rate increases.

Market attention has shifted to further rate hikes after the September increase and to developments in inflation expectations. Consumer prices and wages have been trending higher at a 3% pace, and attention is focused on whether a 3% trend will become entrenched as the debate moves beyond the 2% price stability target.

Analysis of price and wage developments has presented the relationship between the GDP deflator and unit labor costs, as well as trends in real wages. There is also scope for discussion of the impact on the macroeconomy as a whole, including pension recipients, should inflation persist.

As long as the Bank of Japan maintains its 2% target, the possibility of further rate hikes is expected to remain even if a hike is delivered in September. Some believe that, depending on upcoming price indicators, the next hike could be brought forward to December.