The head of the Bank of Japan (BOJ), Kazuo Ueda, spoke about the need to raise interest rates if soaring food prices lead to an increase in overall inflation. As he pointed out, the recent price growth was driven by temporary factors. However, a permanent rise in food prices could trigger a hike in the cost of other goods and services.
According to Ueda, if inflation exceeds the projected values, the Bank of Japan will be forced to take drastic measures to reduce monetary support. This points to the possibility of raising interest rates sooner or faster than expected, Reuters reported.
Core consumer inflation, the BOJ's preferred measure of price growth, reached 3.0% in February. This is above the 2% target, but Ueda expects the rate to gradually approach that level.
In addition, the central bank governor stressed that the regulator should closely examine how growing economic uncertainty linked to US tariffs could affect domestic consumer sentiment.
Analysts polled by Reuters forecast the next rate hike by the Bank of Japan in the third quarter of this year, most likely in July.