Bessent stresses monetary policy communication after BOJ meeting

After meeting with BOJ Governor Ueda, Treasury Secretary Bessent stated:

• He stressed the need for a well-designed and clearly communicated monetary policy to keep inflation expectations anchored.
• He voiced strong backing for Japan's resolute market and monetary actions aimed at correcting the significant undervaluation of the yen.
• He noted the role of yen weakness in fueling domestic inflation in Japan.

In comments made yesterday, Bessent indicated the Federal Reserve typically does not hike rates in response to supply shocks, suggesting there was no need for tightening. He also remarked that the 10-year yield is close to the level seen at the start of the administration's term. This appeared to imply the Fed did not require tightening, a stance that contrasted somewhat with the Fed Chair's remarks last week. Additionally, he did not mention the drop in the 10-year yield from 4.80% to 3.86% and its subsequent rebound to 4.80%, which suggests an increase in inflation and possibly inflation expectations. Inflation shocks have the potential to raise inflation expectations.

Crude oil has risen by more than $3, trading at $89.34, following reports of an American attack on Iran.