Tokyo — Business sentiment among Japanese firms improved in the three months to March while corporate inflation expectations rose to record levels, a closely watched survey showed on Wednesday, strengthening the case for a near-term interest rate hike by the Bank of Japan, even as escalating fuel costs linked to the Iran conflict darken the economic outlook.

The central bank’s quarterly “tankan” survey indicated that large manufacturers’ sentiment index rose to +17 in March, slightly above market forecasts of +16 and up from +16 in December, marking its highest level since December 2021.

The improvement extended a fourth consecutive quarter of gains, suggesting that parts of Japan’s industrial sector have continued to recover despite mounting global uncertainties.

Sentiment among large non-manufacturers remained robust, with the index holding steady at +36, surpassing a median market forecast of +33. The strength in the services sector was supported by rising profits from price increases and a continued recovery in inbound tourism, according to the survey data.

A Bank of Japan official said resilient demand for artificial intelligence-related semiconductors and easing uncertainty over U.S. trade policy helped offset pressures from higher input costs and geopolitical tensions in the Middle East.

At the same time, the survey highlighted growing inflationary pressures within the corporate sector. Companies reported rising expectations for future price increases, reflecting the impact of higher fuel and raw material costs.

Analysts said this trend could provide additional justification for the central bank to move toward policy normalisation after years of ultra-loose monetary settings.Mari Iwashita, executive rates strategist at Nomura Securities, said the survey underscored mounting inflation risks driven by external shocks.

She noted that companies facing surging energy costs may increasingly pass those expenses on to consumers, reinforcing upward pressure on prices.The data comes at a critical juncture for the Bank of Japan, which is weighing whether to raise interest rates as early as this month.

Market participants have been closely monitoring the tankan survey as a key gauge of corporate sentiment and investment plans.Despite the relatively upbeat current conditions, the survey revealed growing caution among firms about the near-term outlook.

Both manufacturers and non-manufacturers expect business conditions to deteriorate over the next three months, reflecting concerns about the economic fallout from the Iran conflict and its impact on energy markets.

The ongoing conflict has driven up global fuel costs, increasing operational expenses for Japanese companies that rely heavily on imported energy. The resulting squeeze on margins is expected to weigh on profitability, particularly for industries with limited pricing power.

Marcel Thieliant, head of Asia-Pacific at Capital Economics, said the strength of the survey could still encourage policymakers to act. He noted that firms appeared to be absorbing the energy shock for now, suggesting that underlying economic conditions remain stable enough to support a rate hike in the near term.

Capital expenditure plans among large firms also pointed to cautious optimism. Companies expect to increase investment by 3.3% in the fiscal year 2026, exceeding a median market forecast of a 3.0% rise.

The planned increase suggests that firms are continuing to invest in growth despite heightened uncertainty.The survey period, which ran from February 26 to March 31, captured responses from roughly 70% of firms by March 12, shortly after the escalation of hostilities involving the U.S.-Israel attacks on Iran on February 28.

This timing indicates that early assessments of the conflict’s economic impact are already being reflected in corporate sentiment.Economists cautioned that the positive momentum seen in the survey may not be sustained if external conditions worsen.

Stefan Angrick said that while a weak yen and subdued wage growth have supported corporate margins, broader economic challenges remain.He noted that export growth could weaken amid slowing global demand, while domestic consumption may remain constrained by modest income gains.

Over time, these factors could weigh on corporate profits and sentiment, complicating the central bank’s policy decisions.The survey underscores the delicate balance facing policymakers as they navigate between emerging inflationary pressures and risks to economic growth.

While improving sentiment and rising prices strengthen the case for tightening monetary policy, the uncertain global environment, particularly developments in the Middle East, continues to pose significant challenges for Japan’s export-driven economy.

Federal Reserve Bank of Cleveland President Beth Hammack emphasizes the Fed’s careful balancing of inflation control and economic stability, highlighting optimism about long-term economic growth and resilience.

Federal Reserve Bank of Cleveland President Beth Hammack recently shared her views on the U.S. economy, expressing cautious optimism as the Federal Reserve continues its efforts to maintain price stability while supporting employment.

Speaking at an event hosted by the Economic Club of New York, Hammack acknowledged that while inflation remains a challenge, the Federal Reserve is closely monitoring the situation and maintaining policies designed to support sustained economic growth.

Hammack noted that the current stance of monetary policy is close to a neutral point — a level that neither accelerates nor restricts economic activity.

She stated that while there are still some pressures on prices, the U.S. job market continues to demonstrate strength and adaptability, a sign that the broader economy remains resilient despite recent inflationary trends.

According to Hammack, the Federal Reserve’s policy approach aims to balance multiple objectives: keeping inflation in check, promoting employment, and ensuring stable financial conditions.

She highlighted that the Fed’s decisions are guided by data, collaboration, and long-term economic sustainability. This measured approach reflects the institution’s commitment to maintaining the health and confidence of the American economy.

Hammack emphasized that while inflation has been a key concern for policymakers, there are encouraging signs of progress as supply chain pressures ease and consumer confidence stabilizes.

She said the Fed is continuing to assess the balance between interest rate levels and their impact on both inflation and growth, underscoring the importance of patience and precision in policy adjustments.

She acknowledged that maintaining stability in such a complex environment requires vigilance but expressed faith in the Federal Reserve’s capacity to adapt effectively.

The focus remains on steering the economy toward a soft landing — reducing inflation gradually without stalling growth or causing unnecessary disruptions in the labor market.

In her address, Hammack also pointed out that the U.S. economy has shown remarkable resilience despite global headwinds. Strong employment figures, steady consumer spending, and robust business investment all indicate that the fundamentals of the economy remain strong.

She expressed confidence that, with the right policy mix, inflation can be brought under control while preserving economic momentum.

Hammack’s comments come at a time when central banks globally are facing similar challenges of managing inflation amid evolving market dynamics.

Her perspective reflects the Federal Reserve’s balanced approach — maintaining flexibility while focusing on achieving the dual mandate of price stability and maximum employment.

The Cleveland Fed president also highlighted the importance of communication and transparency in monetary policy, emphasizing that clear guidance helps businesses and investors plan effectively.

She added that collaboration among policymakers, economists, and financial institutions plays a crucial role in ensuring steady progress toward long-term economic goals.

Overall, Hammack’s outlook reflects a positive sentiment about the direction of the U.S. economy. While acknowledging short-term challenges, she reinforced the belief that the combination of strong fundamentals, strategic policymaking, and market adaptability will ensure continued growth.

Her message of cautious optimism underscores the Fed’s confidence in navigating current economic complexities while maintaining its focus on sustainable prosperity.

As the U.S. continues to adjust to post-pandemic dynamics, inflation control, and changing global conditions, Hammack’s comments serve as a reminder of the Federal Reserve’s enduring commitment to economic stability.

The balance between managing inflation and supporting employment remains delicate, but the Fed’s pragmatic and data-driven approach continues to inspire confidence in the resilience of the American economy.

Renewed fears over U.S. regional bank credit quality ripple across global markets, reminding investors of 2023’s volatility — but analysts see resilience and opportunity amid the correction.

Global Markets Face a Wake-Up Call

Global financial markets experienced a sharp jolt this week as fresh concerns over U.S. regional bank credit risks triggered a selloff across major banking stocks.

The wave of anxiety, reminiscent of the 2023 banking turmoil, underscored the fragility of investor confidence in a year already marked by trade tensions, high valuations, and uneven economic recovery.

The latest bout of volatility began after Zions Bancorp and Western Alliance disclosed loan losses and allegations of borrower fraud, reviving worries about lending standards and potential contagion.

The news set off a chain reaction from Wall Street to Europe and Asia, shaking sentiment across global markets that had otherwise enjoyed a strong year.

Despite the turbulence, analysts emphasized that this was not a systemic crisis but a market reality check — one that highlights both the resilience and the sensitivity of the global financial ecosystem.

The selloff brought back uneasy memories of the 2023 banking crisis, when the collapse of Silicon Valley Bank sent shockwaves through global markets. However, today’s situation differs markedly.

Financial institutions, particularly in Europe and the U.S., have stronger capital buffers, improved oversight, and healthier liquidity compared to two years ago.

“The market is clearly priced for perfection,” said Bo Pei, analyst at US Tiger Securities. “This leaves sentiment vulnerable, so even isolated negative headlines can trigger outsized reactions like what we saw yesterday.”

The KBW Banks Index, tracking large-cap U.S. banks, fell 0.4%, while the KBW Regional Banking Index dropped 6.3% in the previous session. Meanwhile, European bank stocks (.SX7P) slipped nearly 3%, led by steep declines in Deutsche Bank, Barclays, and Societe Generale.

Yet, amid the selloff, several regional U.S. banks reported strong quarterly earnings, including Truist Financial, Regions Financial, and Fifth Third, which helped stabilize investor confidence.

Shares of Western Alliance rebounded 2.6% after heavy losses a day earlier, signaling that the market reaction may be more emotional than structural.

Resilience Amid the Ripples

Market experts say the root of the concern lies in isolated credit events rather than systemic weakness. “Pockets of the U.S. banking sector, including regional banks, have given the market cause for concern,” noted Russ Mould, investment director at AJ Bell. “But the broader fundamentals remain solid.”

At the same time, global investors are wary of high equity valuations and an AI-driven stock rally that some believe has inflated expectations.

The correction in bank shares may therefore serve as a healthy adjustment, allowing markets to cool before the next growth cycle.

White House economic adviser Kevin Hassett sought to reassure investors, saying U.S. banks maintain ample reserves and that officials led by Treasury Secretary Scott Bessent and Federal Reserve Governor Michelle Bowman are ensuring stability. “They are cleaning things up right now,” Hassett said in a television interview, adding that credit markets are expected to “stay ahead of the curve.”

The fear-driven selloff spread swiftly across regions. In Asia, Japanese banks and insurers saw sharp declines, while in Europe, banking and financial stocks fell nearly 3%, marking one of their worst days in recent months.

“What we see in the banks selling off overnight in the U.S., Asia wakes up to it, Europe wakes up to it, and so it spreads,” said James Rossiter, head of global macro strategy at TD Securities.

However, despite the dip, analysts pointed out that European bank shares remain up nearly 40% year-to-date, highlighting strong overall performance and profitability.

Meanwhile, gold prices hit a record high, reflecting a temporary flight to safety among investors. Yet, this move also demonstrated that investors were hedging risk, not exiting markets entirely — a sign of continued confidence in the financial system.

Credit Markets Under the Microscope

Behind the selloff lies a broader reassessment of credit market stability. The failures of two U.S. auto firms and rising private debt impairments have heightened scrutiny over lending practices and exposure.

Mark Dowding, CIO of RBC BlueBay Asset Management, noted that default rates have reached 5.5% — a figure that, while elevated, remains manageable within current economic conditions.

Meanwhile, U.S. banks borrowed nearly $15 billion from the Federal Reserve’s Standing Repo Facility (SRF) earlier in the week, reflecting short-term liquidity needs tied to Treasury settlements.

Analysts said this was a sign of prudent liquidity management, not distress. The SRF, introduced in 2021, serves as a safety net to ensure smooth cash flow and market functioning.

Despite short-term volatility, experts stress that the global banking sector remains resilient, capitalized, and well-positioned for long-term growth. The recent shakeout underscores the importance of vigilance and balanced optimism as markets navigate a complex macroeconomic environment.

“The market has been concerned about a bubble brewing in private credit for months,” said Alan Devlin, global financials research analyst at Impax Asset Management. “But this is a market that reacts first and analyzes later — and in that reaction, opportunity often emerges.”

For long-term investors, this correction may serve as a buying opportunity rather than a warning sign. As credit markets stabilize and global banks adjust to new realities, the financial sector appears ready to adapt — stronger, leaner, and more resilient than before.

Federal Reserve’s signal sparks investor optimism, driving Dow and S&P 500 into positive territory as markets eye stability and easing liquidity pressures

In a notable turnaround for U.S. financial markets, the Dow Jones Industrial Average and the S&P 500 edged into positive territory on Tuesday following remarks by Federal Reserve Chair Jerome Powell, who indicated that the central bank could soon bring its ongoing balance sheet runoff — often referred to as quantitative tightening — to a close.

The statement sparked optimism among investors that tighter financial conditions may soon ease, providing a fresh tailwind to equities after weeks of volatility.

At 12:27 p.m. ET, the Dow Jones Industrial Average climbed 216.82 points, or 0.47%, to 46,284.03, while the S&P 500 gained 3.08 points, or 0.05%, to 6,657.80.

Meanwhile, the Nasdaq Composite remained under slight pressure, falling 0.34% to 22,617.72, as technology stocks lagged behind broader market gains.

Powell’s Remarks Revive Market Confidence

Powell’s comments came during a financial stability discussion in Washington, where he acknowledged that the Federal Reserve was making progress in normalizing its balance sheet but noted that the central bank was “closer to the end than the beginning” of the runoff.

This move, which involves reducing the Fed’s holdings of Treasuries and mortgage-backed securities, was designed to drain excess liquidity from the financial system following the pandemic-era stimulus.

Markets interpreted Powell’s remarks as a signal that the Federal Reserve may be preparing to adopt a more neutral stance on monetary policy after an extended period of tightening.

The reassurance of potential policy stability boosted investor confidence, particularly among institutional traders who have been cautious amid concerns of higher borrowing costs and slowing corporate earnings.

The optimism rippled through sectors most sensitive to interest rate changes, with financials and industrials leading gains on the S&P 500. Major banks like Citigroup and JPMorgan Chase saw moderate advances as investors priced in a more stable credit environment. The easing of balance sheet runoff expectations could also relieve pressure on liquidity, benefiting the broader banking system.

Industrial stocks, including Boeing and Caterpillar, also gained ground, reflecting growing confidence in continued infrastructure and capital investment trends.

The shift in sentiment suggested that investors were beginning to price in a “soft landing” scenario — where inflation cools without triggering a severe recession.

Tech Stocks Lag Despite Broader Optimism

While the Dow and S&P 500 turned positive, the Nasdaq Composite remained in the red, weighed down by declines in major technology firms such as Broadcom and Nvidia, which saw mild pullbacks after recent rallies. Analysts suggested that investors are rotating out of high-growth tech names into value-oriented and cyclical sectors, anticipating a period of stable but moderate economic growth.

Nevertheless, the longer-term outlook for technology remains strong, with companies continuing to benefit from trends in artificial intelligence, semiconductors, and cloud infrastructure.

“This brief dip in tech could simply be profit-taking,” said one market strategist, adding that the fundamentals of the sector remain intact.

The timing of Powell’s remarks also coincides with the beginning of the third-quarter earnings season, which will see major corporations across finance, technology, and energy sectors report results in the coming weeks. Market participants are optimistic that solid earnings, combined with potentially easing monetary pressures, could provide the next leg of the market’s rally.

“Powell’s tone today was reassuring,” said Sophie Lang, senior economist at Morningcrest Capital.

“Investors have been looking for clarity on liquidity conditions, and his statement signals that the Fed may soon pivot toward balance, rather than further tightening. That alone reduces uncertainty — and markets love certainty.”

While Powell’s comments offered relief, analysts cautioned that the Fed’s next moves will depend heavily on upcoming inflation and employment data. Any resurgence in inflationary pressures could delay the end of the runoff or trigger renewed tightening. Still, the broader consensus appears to be that the worst of liquidity constraints is behind the market.

The Federal Reserve’s dual mandate of promoting maximum employment and stable prices continues to guide its decisions, but with inflation trending lower and economic activity stabilizing, investors see growing room for a more balanced approach.

The Bigger Picture

Tuesday’s modest rally reflects growing optimism across Wall Street that the Federal Reserve’s tightening cycle is nearing completion. With Powell signaling a potential end to the balance sheet drawdown, markets are beginning to envision a period of renewed stability and strategic growth.

As the Dow and S&P 500 moved upward, investors welcomed the possibility of a more predictable financial landscape — one that could restore confidence, encourage lending, and reignite equity momentum heading into the final quarter of 2025.

In essence, Powell’s message has offered something Wall Street craves most — clarity and calm. And in today’s market, that alone is enough to turn cautious sentiment into cautious optimism.

”Population shifts won’t rock U.S. inflation,” says Fed Governor Stephen Miran.

As the U.S. Federal Reserve continues to refine its policy tools, recent analyses around immigration’s impact on housing and inflation underscore a measured, data-driven approach that reassures both markets and consumers. Fed Governor Stephen Miran’s recent assessment sparked discussions about potential effects of immigration trends on rent and overall inflation, but experts emphasize that the broader U.S. economy remains resilient.

Miran’s evaluation, which referenced historical housing data from the 1980 Mariel boatlift in Miami, aims to understand how changes in population dynamics could influence rental markets and consumer prices. While his initial estimates suggested a moderate effect on rent inflation, leading economists point out that the actual impact is smaller than early figures implied, highlighting the robustness of U.S. housing and rental markets.

Albert Saiz, a distinguished MIT economist whose research informed parts of Miran’s analysis, notes that population growth and migration patterns do influence housing prices, but the magnitude is manageable. Even with shifts in local demand, overall consumer inflation is projected to remain stable, giving policymakers confidence in a steady economic environment. This measured perspective allows the Fed to carefully calibrate its interest rates while maintaining its dual focus on price stability and employment growth.

By considering the full scope of population trends and rental market data, Miran and the Federal Reserve are demonstrating a forward-looking approach. Their work reflects an effort to anticipate market movements without overreacting to short-term changes, ensuring Americans experience balanced and predictable inflation trends. Saiz’s latest research shows that a modest adjustment in rent inflation would have a limited effect on the national consumer price index, reinforcing that the economy is fundamentally resilient.

Miran’s updated analysis retains a cautious estimate for rent-related inflation adjustments but emphasizes that the effect on total inflation will be minimal, around 0.1 percentage points per year. This measured approach allows the Fed to respond thoughtfully, maintaining a stable monetary environment while still addressing emerging trends. Analysts see this as a positive step in ensuring that policy decisions are informed, data-driven, and protective of consumer interests.

The discussion also highlights the broader benefits of rigorous research in shaping economic policy. By incorporating historical data and contemporary studies, the Fed continues to provide guidance that supports sustainable growth. This balance reassures businesses, investors, and everyday Americans that inflation and housing markets are being monitored and managed carefully, reducing uncertainty and enhancing economic confidence.

As the Federal Reserve evaluates its policies in light of these findings, markets can remain optimistic. The emphasis on careful measurement, combined with the recognition that population shifts have a manageable effect on inflation, underscores the Fed’s commitment to a stable, forward-looking economy. Policymakers are thus positioned to make informed, proactive decisions that support both economic stability and long-term growth.

In conclusion, the ongoing analysis of immigration and housing impacts illustrates the Fed’s dedication to maintaining a resilient economy while applying thoughtful, research-based policy decisions. Americans can take comfort in knowing that the central bank is continuously evaluating trends and employing measured strategies to ensure stability, affordability, and continued economic growth across the nation.

“Financial stability cannot be taken for granted; policy coordination is essential to navigate emerging risks,” said Shin Sung-hwan, a board member of the Bank of Korea.

South Korea’s central bank is emphasizing the critical importance of coordinated policy measures to safeguard the nation’s financial system amid evolving risks, according to statements by board member Shin Sung-hwan.

Speaking in the wake of the Bank of Korea’s recent decision to maintain interest rates, Shin highlighted the delicate balance policymakers must strike between fostering growth and curbing financial instability.

“While household debt growth shows tentative signs of stabilization due to government interventions, ongoing expectations for rising housing prices in the capital region demand vigilant policy coordination,” Shin noted. He stressed that easing financial conditions without careful oversight could reignite vulnerabilities in the economy, necessitating continued application of macroprudential measures.

The remarks come as South Korea faces mounting pressures on its housing market. Despite slowing growth in household debt in July, figures accelerated again in August, underscoring the challenges of maintaining financial equilibrium in Asia’s fourth-largest economy. The government, under President Lee Jae Myung, has implemented targeted policy interventions aimed at containing sharp increases in home prices.

Shin, considered a dovish voice on the bank’s monetary policy board, had advocated for a rate cut at last month’s meeting. However, the board ultimately opted to hold the policy interest rate steady, reflecting a cautious approach amidst potential financial stability concerns. Another board member, Hwang Kun-il, emphasized the difficulty of timing future rate reductions, citing the need for prudence to preserve economic resilience.

The Bank of Korea’s position underscores a broader strategic objective: maintaining a stable financial environment while supporting sustainable growth. Experts say this approach reflects the institution’s commitment to mitigating systemic risk through proactive coordination with government policy, particularly in the housing and credit sectors.

Washington (France24) — US Consumer Price data for the month of September will be released later this Thursday, and is expected to stay high. Core prices, which exclude food and energy, are expected to have increased 6.5 percent annually last month, a rate not seen in 40 years. The data will be crucial for the US Federal Reserve ahead of its next meeting in early November, as it decides whether or not to continue with its aggressive rate-hiking policy.