+965 2224 8361
Daily Economic Update
17.06.2025Japan: Bank of Japan holds rate steady amid rising uncertainties. The BoJ has this morning kept its short-term interest rate steady for the third consecutive meeting at 0.5% by a unanimous vote. In addition, the BoJ decided by an 8 to 1 vote to halve its quarterly purchases of Japanese government bonds starting in the April-June 2026 quarter so that monthly purchases fall to around JPY2.0 trillion by January-March 2027, while making no changes to the tapering plans for the current fiscal year, under which it is reducing its purchases by JPY400 billion ($2.76 billion) per quarter, preferring to have a more prudent approach to reducing its stimulus. The decision came as policy makers are weighing the fragile economic recovery and elevated consumer price inflation against the backdrop of rising trade uncertainties and tensions in the Middle East. The pause also came amid the recent ease in Japanese long-term bond yields, with the 30-year and 40-year yields currently at 2.8% and 3.07%, respectively, down from the peaks of 3.0% and 3.33% in the third week of May and the strengthening of the yen which has been hovering around JPY142-145/$ since mid-May compared with near JPY150/$ in early April.
Oil: Prices fall on reports that Iran seeks to de-escalate; OPEC keeps demand growth estimates firm. Brent futures fell 1.3% d/d to $73.2/bbl on Monday following media reports that Iran, through Arab intermediaries, was seeking to end hostilities and engage once again in talks with the US over its nuclear program. Gold also retreated notably following the news report, indicating a retreat in the geopolitical risk premium. Oil prices are nevertheless trading higher in the Asian session this morning with Brent up 0.5% d/d as uncertainty over the Iran-Israel conflict persists and following US President Trump’s comments that civilians should immediately evacuate Tehran. Meanwhile, OPEC, in its monthly report which did not mention the recent conflagration, kept its oil demand forecasts for this year and next unchanged at 1.3 mb/d. On the supply side, OPEC downgraded its 2026 non-OPEC+ supply growth estimate by 70 kb/d to 730 kb/d, marking the third consecutive downgrade on the effect of lower oil prices on US shale. For group-wide production, OPEC+ output rose by 180 kb/d m/m to 41.2 mb/d in May with the bulk of the increase stemming from Saudi Arabia (177 kb/d), Libya (36 kb/d), and the UAE (27 kb/d), according to OPEC’s secondary sources. Notably, the 411 kb/d m/m output ceiling increase agreed to by the eight members participating in the unwinding of the voluntary cuts only translated into a 153 kb/d increase, with production declining in Iraq (-50 kb/d) and Kazakhstan (-21 kb/d), though the latter is producing significantly above its quota level. Both the IEA’s monthly report as well as the annual oil outlook “Oil 2025” are due later today.
US-UK: Trump and Starmer sign a trade deal, implementing the framework agreed on last month. US President Trump and UK Prime Minister Starmer signed an agreement to implement the trade framework that was agreed between both countries last month. As previously agreed, the deal provides better access to both countries on agricultural and other products and trims US levies on UK cars to 10% under an annual quota (100K vehicles). In new developments, US tariffs on certain aerospace exports by the UK would be removed. However, issues related to US tariffs on steel and aluminum products (currently subject to a 25% rate for UK goods versus 50% imposed widely) are still to be resolved, with the US authorities seeking further safeguards on supply chains before providing concessions, which will be through a quota arrangement decided by the US authorities. In addition, talks on pharmaceuticals trade to provide ‘preferential treatment’ to UK products would also continue. As per US trade data, the UK was the US’s ninth largest goods trade partner, with $148bn of bilateral merchandise trade and a $12bn surplus for the US in 2024. The US-UK deal is the first bilateral trade agreement during the current 90-day ‘reciprocal tariff’ pause window that ends on July 9. There have been several mentions by the US authorities of talks progressing “well” with other key partners, including Japan, South Korea, and India, but the timeline of any concrete announcements remains elusive. Meanwhile, yesterday, in further trade de-escalatory developments, Canada and the US vowed to finalize their bilateral trade agreement within a 30-day period.
UAE: Dubai’s consumer price inflation ticks up in May. Consumer price inflation in Dubai increased to 2.4% y/y in May, up from 2.3% in April. The increase was mainly due to a rebound in food prices, about 12% of the consumer basket, which rose marginally by 0.3% y/y (-0.2% y/y in April). It is worth noting that the housing segment inflation eased for the third straight month, coming in at 6.9% y/y, down from February’s peak of 7.4%. On a monthly basis, the CPI index fell by 0.2%, the steepest since the beginning of the year mainly due to the decline in transport prices (-1.2% m/m) and recreation/sports (-7.5%).