Why it matters
- The ECB holds its deposit rate at 2.50% with a 97% probability, based on market pricing as of Oct. 23 tracked by 25bp.eu. Brown Brothers Harriman said swaps price only a 2% chance of a Bank of Japan hike on Oct. 30.
- Both banks raised rates in September, and markets lean toward a second hike at each in December. Euro-area inflation was 3.8% in September, Eurostat said. Japan's core rate was 2.1%.
- The hikes have not lifted either currency. The euro is down about 3.8% against the dollar since the ECB's Sept. 10 decision, and the dollar buys about 0.8% more yen than after the BoJ's September hike, Yahoo Finance data show.
Analysis: this piece includes our interpretation of the facts reported.
The European Central Bank and the Bank of Japan are both expected to leave rates unchanged this week. The ECB decides Thursday, Oct. 29, and the BoJ ends its meeting Friday, Oct. 30. Market pricing gives a 97% chance that the ECB holds its deposit rate at 2.50%, according to 25bp.eu, which tracks market expectations, as of Oct. 23. Swaps price only a 2% chance of a BoJ hike, Brown Brothers Harriman said, as reported by Tradingpedia.
How do the ECB and BoJ decisions compare?
They are expected to do the same thing for different reasons. Euro-area inflation is close to double the ECB's 2% target. Japan's inflation has only just moved above its target.
| European Central Bank | Bank of Japan | |
|---|---|---|
| Decision day | Thu., Oct. 29 | Fri., Oct. 30 |
| Policy rate | 2.50% (deposit rate) | 1.25% |
| September inflation | 3.8% headline, 2.5% core | 2.1% headline, 2.1% core |
| Chance of a hike this week | 3% (25bp.eu) | 2% (BBH) |
| December pricing | 75% for 2.75% at Dec. 17 (25bp.eu) | 80% for a hike at Dec. 18 (BBH) |
Sources: ECB; Eurostat; Trading Economics; 25bp.eu; Brown Brothers Harriman via Tradingpedia. Japan's core rate excludes fresh food.
The ECB raised all three key rates by a quarter point on Sept. 10, effective Sept. 16. Its staff then projected inflation of 3.0% for 2026, 2.5% for 2027 and 2.1% for 2028, and said risks were tilted upward, mainly from the Middle East conflict and the energy shock. Eurostat said Oct. 16 that euro-area inflation rose to 3.8% in September from 3.2% in August.
The BoJ raised its rate to 1.25% from 1% in September in a 7–2 vote, InvestingLive reported. Japan's core inflation rose to 2.1% in September from 1.7%, the first reading above the BoJ's 2% target in nine months, Trading Economics said. Excluding fresh food and fuel, prices rose 2.4%.
What do economists expect next?
December, at both banks. In a Reuters poll taken Oct. 5–8, 70 of 73 economists expected the ECB to hold this month, and 64 saw a hike in December, RTÉ reported. Forty of 70 saw the deposit rate peaking at 2.75%, and 24 at 3.00%. A Reuters poll also found most economists expect the BoJ to hold this week and hike in December, Tradingpedia reported. Mace News sees a BoJ move to 1.50% in December or January, InvestingLive said.
Why have the euro and yen fallen after rate hikes?
Higher rates elsewhere have offset them. The Federal Reserve also raised rates on Sept. 16, its statement said, and it decides again Wednesday, Oct. 28. The euro traded at $1.1193 on Monday morning, down from 1.1634 at the close on Sept. 10, Yahoo Finance data show. The dollar bought 157.31 yen, up from 156.13 after the BoJ's September hike.
Japan's yields have eased this month. The 10-year government bond yield fell to 2.837% on Oct. 23 from 3.097% on Oct. 2, Ministry of Finance data show. The U.S. 10-year Treasury yield was 5.00% on Oct. 23, a gap of about 2.16 percentage points. At two years, the gap was about 2.82 points: 4.69% against 1.872%.
| Oct. 23 yields | U.S. | Japan | Gap |
|---|---|---|---|
| 2-year | 4.69% | 1.872% | 2.82 pts |
| 10-year | 5.00% | 2.837% | 2.16 pts |
Sources: U.S. Treasury par yields; Japan Ministry of Finance.
For the full calendar, see our week-ahead guide to the Fed, ECB and BoJ, the background in September's central bank decisions, our yen and BoJ yield gap analysis, and live levels on the world markets page.
Sources
- European Central Bank, Monetary policy decisions, Sept. 10, 2026 and Governing Council meeting calendar
- Eurostat, Annual inflation up to 3.8% in the euro area, Oct. 16, 2026
- Trading Economics, Euro area inflation confirmed at 3-year high in September and Japan core inflation rate
- 25bp.eu, ECB rate decision, Oct. 29, 2026
- RTÉ (Reuters), ECB to hike rates again in December as inflation almost doubles 2% target: Reuters poll, Oct. 8, 2026
- Tradingpedia, AUD/JPY extends pullback as BoJ hawkishness lifts yen, Oct. 26, 2026
- InvestingLive, BOJ to hold at 1.25%, but Ueda signals further hikes toward neutral, Oct. 26, 2026
- Bank of Japan, Monetary Policy Meeting schedule
- Federal Reserve, Sept. 16, 2026 FOMC statement and meeting calendar
- U.S. Treasury, Daily Treasury par yield curve rates
- Japan Ministry of Finance, JGB interest rates, October 2026
- Yahoo Finance, EUR/USD and USD/JPY daily data