Axios Macro

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September 21, 2022

Welcome to Fed day! At 2pm EDT, we'll find out whether the Fed delivers another large 0.75 percentage point interest rate hike — or surprises markets with a full percentage point move.

  • Neil will be in the room as chair Jerome Powell takes questions from reporters; more on what to expect below. Follow our breaking coverage at, and we'll be back tomorrow with a full analysis.

In today's edition, a look at the country that's been a global outlier in the fight against inflation: Japan.

Today's newsletter, edited by Kate Marino and copy edited by Katie Lewis, is 624 words, a 2-minute read.

1 big thing: Why Japan is a global outlier

Data: E-Stat, portal site for Japanese government statistics; Chart: Axios Visuals
Data: E-Stat, portal site for Japanese government statistics; Chart: Axios Visuals

Major central banks this week are stepping up efforts to prevent inflation from becoming a lasting feature of their economies. But Japan will continue to sit back, fearing the country's higher prices are just a blip.

Why it matters: For years, Japan has tried to engineer a sustained period of higher inflation, aiming to escape a slow-growth, deflationary trap. Now it faces a historic test as it sticks with ultra-easy money policy — a bet that an era of below-target inflation will return.

Driving the news: Headline inflation in Japan hit 3% from a year earlier in August, figures released by its government show. Rising costs for energy and food accounted for most of that annual increase.

  • That's low by global standards, and flat-out enviable to most other nations seeing prices rise at an uncomfortably fast pace.
  • But relative to Japan's own economy, the jolt in prices is a notable development for a country that's flirted with deflation for much of the past three decades.

Between the lines: Haruhiko Kuroda, the head of the Bank of Japan (BOJ), has insisted the country's inflation will be a short-lived phenomenon that's stoked by higher commodity prices — not stronger wage gains, which the central bank views as the more sustainable driver of inflation.

What's going on: The underlying factors behind soaring prices in other nations — global supply chain snarls and a commodity crunch — are similarly helping drive up inflation in Japan, though to a lesser degree. For one, the government has helped blunt the impact of higher prices through various forms of subsidies for households and businesses.

  • Complicating matters is the Japanese yen's dramatic slide against the U.S. dollar, a phenomenon largely triggered by the ever-widening interest rate gap between the Fed and the BOJ.
  • On the one hand, the weaker yen has boosted Japanese companies with a global presence. But the crashing currency has pushed up already pricey imports of food and fuel — a key reason officials have signaled discomfort with the yen's slide.

What's next: The Bank of Japan's two-day policy meeting concludes on Thursday. Even as inflation jumps, economists expect more of the same from central bank officials — a signal that rock-bottom interest rates are here to stay.

2. The rundown for FOMC day

The Federal Reserve building
The Fed building, under renovation. Photo: Stefani Reynolds/AFP

The many moving parts of the Fed communications due out this afternoon will make things interesting. As a cheat sheet, here's what comes when, and what we'll be watching.

First up, at 2pm EDT, we get the policy announcement itself. We find out if officials elected to raise rates in line with market expectations — or go more aggressive. That will be interesting primarily because the latter would signal a break-the-glass mindset at the Fed.

Simultaneously, the new Statement of Economic Projections is released, the first new official forecasts out of the Fed since June. The pieces we'll look at most closely:

  • The "dot-plot" of officials' expectations for the path ahead on interest rates will show how much consensus there is within the central bank on a need to rise above 4% next year — and whether there is much inclination to push beyond that toward 5%, as some private forecasters argue will be necessary.
  • Forecasts for the unemployment rate and GDP growth could show how much economic pain will be necessary to get inflation down.

Then, at 2:30, Powell speaks. He will begin with prepared remarks, likely to reflect the blunt, direct talk about the Fed's resolve to fight inflation that we heard in Jackson Hole last month.

  • After that, he'll take questions from reporters. This is where there's more risk of a muddled message: Powell doesn't control what questions will be asked and can tend to give answers that may be intellectually interesting but send mixed signals to markets.