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IMF calls on BOJ to hike interest rates at 'gradual' pace

BY Reuters | ECONOMIC | 10/24/24 09:52 AM EDT

WASHINGTON, Oct 24 (Reuters) - The International Monetary Fund welcomes the Bank of Japan's decision to raise interest rates in July, but further hikes should proceed at a gradual pace, a senior IMF official said on Thursday.

Krishna Srinivasan, director of the IMF's Asia and Pacific Department, also told a press briefing that the global lender now expects the BOJ's policy rate to reach 1.5% in 2027.

The BOJ ended its negative rates policy in March and raised short-term rates to 0.25% in July on the view that Japan was making progress toward sustainably achieving its 2% inflation target. (Reporting by Leika Kihara; Editing by Paul Simao)

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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