CHART OF THE WEEK: The gap between the US, EU and the Japanese rates is closing
The Bank of Japan raised rates for the third time this cycle
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The Bank of Japan raised rates by 25 basis points to 0.50% as expected, bringing the benchmark to the highest level in 17 years.
The central bank expects more rate hikes this year if the economic outlook remains unchanged and global markets will continue to be stable. The market also believes more hikes will occur this year.
Meanwhile, the Bank of Japan analysis suggests the neutral rate could be between 1% and 2.5%.
As a result, the gap between the US, the EU, and Japanese rates has substantially narrowed which is important for the so-called carry trade.
Nevertheless, Japan still has one of the lowest rates in the world among developed economies.
Will this be enough to strengthen the Yen going forward? Will the markets remain stable?
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