BOJ's "hawkish pause" is only awaiting official announcement; market focus has already shifted to the December monetary policy signal.

This week can be described as a "super central bank week"the U.S., Japanese, and European central banks will successively hold monetary policy meetings, with the market's main focus, the Federal Reserve's Federal Open Market Committee (FOMC), set to announce its interest rate decision and monetary policy statement on Wednesday local time (2 a.m. Beijing time Thursday). According to a consensus of Wall Street fixed-income strategists, the three major central banks may all keep rates unchanged this week, but what the market is really watching is: after the pause, how far will tightening still go? The Fed will announce its decision on October 28 U.S. local time, while the European Central Bank and the Bank of Japan will announce their decisions on the 29th and 30th, respectively. The mainstream market expectation is that the Fed will keep the federal funds rate target range at 3.75%4.00%, the ECB will keep the deposit facility rate at 2.50%, and the BOJ will keep its policy rate at 1.25%. All three face energy inflation and financial market volatility, yet none has clearly ended rate hikes. CNBC's economist survey data reveals that the BOJ may adopt a typical "hawkish hold" at this meeting: all 16 surveyed economists expect the BOJ to leave monetary policy unchanged this week, and all expect BOJ officials to lay the groundwork and use forward-guidance language for a rate hike path in December or January next year; 13 of them expect the BOJ's terminal rate to reach 1.75%2% around mid-2027. This means market discussion has shifted from whether to further normalize policy to the pace and endpoint of rate hikes. What will determine the future direction of BOJ monetary policy is whether there is a sustained change in the source of inflation. Japan's September core inflation, excluding fresh food, rose to 2.1% year on year, while August real wages rose 1.5% year on year, increasing for the eighth consecutive month. Imported energy and yen depreciation are pushing up costs, while wage growth may strengthen inflation persistence through consumer demand and service prices. If the BOJ changes its latest assessment of the underlying inflation trend from "close to 2%" to "at 2%," the policy basis for further rate hikes will strengthen; this pause mainly reflects BOJ Governor Kazuo Ueda and other policymakers' observation of policy transmission and bond market capacity to absorb higher rates. CNBC economist survey: BOJ expected to keep rates unchanged this week but maintain hawkish stance According to a CNBC survey, the Bank of Japan is expected to keep its policy rate unchanged at 1.25% at the two-day meeting ending Friday, but the likelihood of a rate hike in the coming months remains high. Given that the BOJ just raised rates last month to the highest level in 31 years, all 16 respondents expect the bank to stand pat this time. All respondents said that as domestic inflation and wages continue to rise, they expect the BOJ to lay the groundwork for a rate hike in December this year or January next year. Homin Lee, senior macro strategist at Lombard Odier, said macroeconomic factors support further policy tightening by the BOJ. He added: "But given the fragility of the domestic bond market, the policy board may not yet have formed sufficient consensus on consecutive rate hikes." Sosuke Nakamura, senior economist at Citigroup Research, said he has not yet seen clear signs that inflation is accelerating enough to support consecutive rate hikes. Japan's September core inflation, excluding fresh food, rose 2.1% year on year, the highest level this year. A weak yen is pushing up import costs, and higher energy costs are also feeding through to prices, even though government subsidies have already borne part of the energy price pressure for consumers. According to the latest government data, Japan's inflation-adjusted wages rose 1.5% year on year in August, increasing for the eighth consecutive month, also signaling that wage growth may drive inflation. According to reports, Japanese Finance Minister Satsuki Katayama told lawmakers last week that Japan "is on the threshold of shifting to a period of sustained inflation driven by rising wages," while acknowledging that rising import costs are also pushing up prices. According to a summary of economist forecasts by Reuters and The Japan Times, they unanimously expect the BOJ to announce at this meeting that its 2% "underlying inflation" target has been achieved. Ryutaro Kimura, senior fixed-income strategist at BNP Paribas Asset Management, said he is watching whether the BOJ will change its inflation language in this week's monetary policy statement from "underlying consumer price index inflation has been approaching 2%" to "has reached 2%." As for the yen, nine respondents expect the dollar-yen pair to trade in the 157158 range over the next month. Forecasts for the yen three months out were more dispersed, ranging from 150 to 160. Masahiko Loo, senior fixed-income strategist at State Street Investment Management, said: "BOJ policy normalization, higher domestic yields, and changes in institutional fund flows should gradually narrow rate differentials and drive capital back to Japan." But he added: "Elevated U.S. yields will prevent the yen from rising in a straight line." Last week, popular stocks linked to the AI computing theme and the technology stock market sold off, triggering safe-haven demand, strengthening the yen against the dollar and lowering Japanese government bond yields. This reversed the move earlier this month, when Japanese Prime Minister Sanae Takaichi's spending plans and a global bond selloff weighed on the yen and Japanese government bonds. Nine respondents said they expect the benchmark 10-year Japanese government bond yield to reach 3%3.1% by year-end, above the current 2.809%. Seven respondents expect the 30-year Japanese government bond yield to rise from 3.829% on Tuesday to 4%4.1%. This forecast comes against the backdrop of analysts expecting the BOJ to resume tightening after temporarily standing pat in October. Takuji Aida, chief Japan economist at Credit Agricole, said the next rate hike may come in January, when the BOJ plans to release its quarterly outlook report assessing economic activity and prices. Thirteen respondents said they expect the terminal ratethe rate level at which the BOJ is expected to end this tightening cycleto reach 1.75%2% around mid-2027. Masato Koike, senior economist at SOMPO Institute Plus, said macroeconomic data show the policy rate is approaching the neutral level of 2%, which is also the BOJ's inflation target. But he said: "Considering Japan's economic conditions and the need to avoid excessive downward pressure on growth, I expect the BOJ to stop raising rates when the rate reaches about 1.75%." CNBC conducted this survey of the above 16 senior economists and fixed-income strategists on BOJ rate hike expectations between October 14 and 26. Goldman Sachs draws policy boundaries: further tightening of financial conditions does not mean the rate hike task is complete The latest judgment from Wall Street financial giant Goldman Sachs shows that the Fed's October pause and December hike reflect a slower pace, not a shift to easing. Goldman strategists said its Financial Conditions Index (FCI) has tightened by about 30 basis points since September; Goldman believes the overall tightening is only slightly greater than what is usually associated with one rate hike and is not yet enough for the FOMC to view it as a substitute for further rate hikes. The 30 basis points here are changes in a composite financial conditions indicator and cannot be directly treated as a 30-basis-point increase in the policy rate. But Goldman also did not endorse the most hawkish path of sustained consecutive rate hikes. It expects tariffs, energy shocks, and AI-related price pressures to gradually weaken, so the baseline scenario does not include another rate hike in March 2027, and there is still room for rate cuts in the future; only if inflation is stronger than forecast, especially if the Iran conflict keeps oil prices persistently above its assumptions, could further rate hikes re-enter the baseline judgment. Goldman's latest stance on Fed monetary policy can be summarized as: the recent pause is not enough to declare the end of tightening, and current inflation is not enough to prove that rate hikes must continue indefinitely. This makes the trading focus for stocks, bonds, and currencies this week center on changes in the policy path relative to existing pricing. If the three major central banks strengthen subsequent rate hike signals, short-end yields are more likely to rise, and valuations of long-duration growth stocks and new financing for AI projects will continue to face pressure; if the inflation outlook improves and the number of future rate hikes is lowered, that would help ease discount-rate pressure. For Japan's financial markets, where safe-haven value has recently become prominent, higher domestic yields may enhance the appeal of local bonds and support some capital repatriation, but U.S. Treasury yields are also elevated, so the yen may not necessarily appreciate one-way as a result. In the CNBC survey, one-month dollar-yen forecasts were concentrated at 157158, while three-month forecasts were dispersed to 150160, precisely reflecting this uncertainty over relative rates and capital flows.