The Bank of Japan is projected to raise its short-term policy rate to 2% from 0.75% currently by the end of 2027, as robust domestic demand will help the economy absorb external shocks from the Middle East conflict, the OECD said in a report on Wednesday.

The assessment lends support to the BoJ's recent hawkish tilt ahead of its June policy meeting, with the Organization for Economic Co-operation and Development arguing that higher inflation expectations, solid wage growth and a closed output gap justify continued rate hikes as Japan transitions away from decades of near-zero inflation.

The Paris-based body urged Japan to rely primarily on consumption tax hikes to boost revenues as ⁠the current rate, at 10%, is among the lowest in member economies. (RTRS – Continue Reading)

The dollar strength will build further over the near term as the energy-price shock will keep yields elevated as economic growth remains relatively resilient, according to Goldman Sachs Group.

“The combination of rising inflation and relatively resilient growth has already meant higher-for-longer yields, and any further concern about the duration of the energy shock should continue to drive relative returns consistent with shifting terms of trade,” Karen Reichgott Fishman, a strategist at the bank, wrote Tuesday. “That scenario should also fuel broad dollar strength across Group of 10 currencies.” (BBG – Continue Reading)

Senior US and Chinese officials agree that no country can be allowed to exact shipping tolls in the Strait of Hormuz, the State Department told Reuters on Tuesday, in a sign that the two countries are trying to find common ground on efforts to pressure Iran to give up control of the vital waterway.

The statement by the State Department comes ahead of a high-stakes summit between President Donald Trump and Chinese President Xi Jinping later this week, where Iran's chokehold on the strait will be on the agenda.

Iran's near-complete closure of the vital trade artery since the joint Israeli-US airstrikes on the country on February 28 has sent shockwaves through global energy markets. (RTRS – Continue Reading)