Oct 23, 2026 · 50 min

Markets weigh inflation, AI spending and Japan’s policy pivot

Daybreak Weekend: US Tech, UK Budget, BOJ Decision

The week’s major decisions hinge on whether persistent price pressures can coexist with cautious central banks and heavy investment in artificial intelligence.

3 key takeaways

1The Federal Reserve faces persistent inflation and internal dissent as markets expect policymakers to hold rates steady.
2Big Tech must show cloud growth and future returns can justify surging AI infrastructure spending.
3The Bank of Japan weighs normalization, yen volatility and carry-trade risks as inflation appears increasingly embedded.

Don't miss

The Japan discussion connects a possible end to deflation with yen carry-trade unwinding and broader financial conditions.

The brief

The week opens with a familiar policy dilemma: the Federal Reserve may pause despite elevated inflation, leaving officials to explain why price pressures have not earned another rate move.

Mandeep Singh examines whether Alphabet, Microsoft and Amazon can turn surging AI capital spending, cloud growth and infrastructure backlogs into credible returns.

The UK budget faces a narrow path between supporting growth and protecting households while high borrowing costs, welfare spending and debt service constrain Chancellor John Healey.

The Bank of Japan may hold rates while signaling a hawkish path toward normalization, testing whether inflation has finally become durable after decades of deflation.

Yen volatility and the possible unwinding of carry trades show how a Japanese policy shift could tighten financial conditions well beyond Japan.

What was said on this episode

17 statements · 7 positive · 6 negative · 4 neutral

Michael McKeeon Federal ReserveNegative4:19
The chance of a surprise Fed rate move is very small.
“They'd be pretty small.”
Listen at 4:19
Michael McKeeon Federal ReserveNegative5:24
Some Fed officials will dissent from holding rates unchanged and favor immediate hikes.
“we should have some dissents to the idea of doing nothing. They think we need to be raising rates right now.”
Listen at 5:24
Michael McKeeon Core PCE inflationNegative6:56
Core PCE inflation’s three- and six-month annualized rates are rising significantly.
“the three and six months annualized rate is rising and rising somewhat significantly.”
Listen at 6:56
Michael McKeeon Wholesaler and retailer pricingNegative8:01
Wholesalers and retailers are raising prices, widening their margins.
“those companies are raising prices.”
Listen at 8:01
John Healeyon John HealeyPositive20:53
John Healey’s budget will protect resilience in the British economy.
“that's what my budget will do.”
Listen at 20:53
John Healeyon UK government spending policyPositive21:04
The UK government should control spending to reduce the deficit and borrowing costs.
“we have to control spending. It has to be part of a plan to bring down the deficit”
Listen at 21:04
Phil Aldrichon UK bank taxNeutral26:07
The UK budget will introduce a bank tax.
“it seems nailed on that we're going to get a bank tax.”
Listen at 26:07
Phil Aldrichon UK online sales taxNeutral26:13
The UK budget will likely introduce an online sales tax.
“there's going to be, it looks like there's going to be some kind of online sales tax”
Listen at 26:13
Phil Aldrichon UK budgetPositive28:34
Markets and businesses want a restrained, low-disruption UK budget.
“They do want this do-no-harm budget. They do want this beige budget.”
Listen at 28:34
Phil Aldrichon John HealeyNegative30:07
Bond markets may judge Healey’s budget insufficiently credible.
“there is a risk that the bond markets don't find what Healy does in the budget is credible”
Listen at 30:07
Taro Kimuraon Bank of Japan monetary policyNeutral39:14
The BOJ will hold rates next week and hike in December.
“the answer for the next week is the hawkish hold, and they're going to deliver a rate hike in December”
Listen at 39:14
Taro Kimuraon Bank of Japan terminal rateNeutral39:37
Japan’s current tightening cycle will end with a 2% policy rate.
“I see my terminal rate at 2%”
Listen at 39:37
Taro Kimuraon Japan economic growthPositive41:00
Japan’s growth will be 0.5% in 2026 and above 1% in 2027.
“We are forecasting 0.5% for 2026 and extended it to above 1% for 2027.”
Listen at 41:00
Taro Kimuraon Japanese corporate earnings and growthPositive41:57
Japanese corporate earnings and growth momentum will remain solid despite BOJ hikes.
“the corporate earnings is going to remain solid and growth momentum is going to remain solid.”
Listen at 41:57
Taro Kimuraon Bank of Japan monetary policyNegative44:39
Continued AI-stock correction could cause the BOJ to reverse its hawkish policy turn.
“the BOJ may change the course for their uh hawkish turn that's made in september”
Listen at 44:39
Taro Kimuraon Japan deflationary mindsetPositive45:27
Japan’s deflationary mindset has been shed across the economy.
“Japan's... deflationary mindset was shook off from corporates, from households, from economists, every player in the economy.”
Listen at 45:27
Taro Kimuraon Bank of Japan monetary policyPositive46:10
A BOJ rate near 2% should keep inflation around its 2% target.
“the hike towards 2%, which I think is a terminal rate for this current tightening cycle, is enough to keep the price settling around 2% target.”
Listen at 46:10

Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.

Weekly email

State of the Pod, every Monday

The week's most-discussed names and stories from podcasts, with the moments behind them. Free, five minutes, unsubscribe in one click.