Bank of Japan Governor Ueda said the exact level of the neutral rate is difficult to determine; the Bank of Japan will closely monitor how the Japanese economy responds to changes in short-term rates.

Refinitiv survey of economists shows the ECB is expected to raise the deposit rate to 2.25% at its June 11 meeting, with a further increase possible in September. Policymakers are weighing energy-driven inflation against a slowing economy: May headline inflation was 3.2%, above the ECB’s 3.0% target, while core inflation unexpectedly rose to 2.5%, suggesting the Iran conflict is lifting prices. Recent PMIs and official data point to economic slowdown; the conflict has now run more than three months and the Strait of Hormuz remains severely congested, a factor that could worsen inflation and supply risks. Most policymakers view a June hike as inevitable and say a peace deal would likely not stop it, but economists caution that weak activity, a softening labour market and policy rates already high versus the 2022 inflation shock argue against aggressive further tightening.

UN meteorological agency forecasts a moderate El Nifio in coming months, possibly strengthening to strong; this could push up global temperatures and increase the risk of extreme weather.