FXT Economic Data Summary (Asia-Pacific | 09/11)

ECB Raises Interest Rates

The European Central Bank tightened monetary policy again, raising its three key interest rates by 25 basis points, with the deposit rate increasing from 2.25% to 2.50%. As higher energy and transportation costs renew inflationary pressure, the ECB expects inflation to remain above its 2% target for an extended period. However, the Governing Council has not committed to a fixed rate path, with future decisions remaining dependent on inflation and economic conditions.

The latest projections keep headline inflation at 3.0% in 2026, while the 2027 forecast was raised from 2.3% to 2.5% and the 2028 estimate from 2.0% to 2.1%. Core inflation remains at 2.5% in 2026, with the 2027 forecast lifted from 2.5% to 2.6% and the 2028 estimate from 2.2% to 2.3%. The broad upward revisions suggest price pressures could prove more persistent than previously expected. FXT analysis suggests inflation persistence remains the ECBs main policy concern, keeping monetary policy relatively tight in the near term.

US Jobless Claims Remain Low

US initial jobless claims fell from a revised 207K to 206K in the week ended September 5, slightly above expectations of 205K, while the four-week moving average declined from 207.5K to 206K. Claims remain at relatively low levels, with no clear sign of a significant increase in layoffs.

Continuing claims edged down from 1.775M to 1.774M in the week ended August 29, while the four-week moving average fell from 1.78075M to 1.779M and the insured unemployment rate held at 1.2%. Compared with a year earlier, initial claims were below 259K and continuing claims remained below 1.927M. FXT analysis suggests both new layoffs and ongoing unemployment remain stable, indicating that the US labor market has yet to show meaningful deterioration and continues to support the economy.

BoJ Signals Further Tightening

BoJ Policy Board member Kazuyuki Masu said the current 1.0% policy rate remains below the Banks estimated neutral range of 1.1% to 2.5%, meaning financial conditions are still accommodative. He supports further policy normalization to avoid being forced into rapid rate hikes if inflation accelerates. Underlying inflation is already close to the 2% target, while stronger corporate cost pass-through, Yen weakness, and higher energy and raw material prices are adding to price pressures.

Japan‘s domestic economic conditions are also improving, with companies expecting income growth of around 3% and real wages returning to positive growth, while previous rate hikes have not significantly weakened corporate financing demand. However, short-term real interest rates remain negative, and prolonged accommodation could further stimulate investment and asset prices. FXT analysis suggests inflation, wages and business conditions are increasingly supportive of further tightening, making the BoJ’s gradual normalization path clearer.

RBA Keeps Focus on Inflation

RBA Assistant Governor Sarah Hunter said controlling inflation remains the policy priority and did not rule out further rate hikes. Following stronger inflation in July, markets have sharply increased tightening expectations, pricing around a 70% chance of a 25-basis-point hike to 4.60% at the September 29 meeting. The RBA is more focused on whether inflation can return to a sustained downward trend than on a modest cooling in economic activity.

Business confidence, consumer sentiment and housing activity have recently weakened, while previous rate hikes have also cooled housing markets, with prices declining across most major cities. However, the RBA views moderate demand weakness as helpful in restoring supply-demand balance and sees no clear signs of recession. FXT analysis suggests that as long as the slowdown remains moderate, softer demand is unlikely to prevent further tightening, leaving inflation as the key driver of the next rate decision.