Global central banks diverge as US and Japan shift monetary policy paths

Global central banks are moving in divergent directions regarding monetary policy. In the United States, the likelihood of a Federal Reserve interest rate hike in September has decreased following July producer price index (PPI) data that showed 0% month-on-month growth, lower than market expectations.

Conversely, the Bank of Japan (BOJ) is increasingly likely to raise interest rates. Markets are currently pricing in an approximately 80% chance of a rate hike as soon as next month, driven by rising producer prices and inflationary pressures from energy costs and AI-related investments. This shift toward a stronger yen could impact global markets through the potential unwinding of yen-carry trades.

Meanwhile, China's central bank, the People's Bank of China, has maintained a more accommodative stance, freezing its Loan Prime Rate (LPR) for nine consecutive months. The central bank noted that while major economies are adjusting policies, these shifts appear to be liquidity adjustments rather than the massive policy reversals seen in previous years. However, the bank warned of persistent inflationary risks stemming from Middle East geopolitical tensions, AI-driven demand for semiconductors and power, and potential tariff policies.