The Bank of Japan is set to raise interest rates on Friday to a three-decade high and signal its readiness for further hikes beyond next year, underscoring its conviction that sustained wage gains will keep inflation around its 2% target.

Thanks to its latest decision on Wednesday – its final one for 2025 – the Federal Reserve has now reduced its key overnight lending rate by 1.75 percentage points since it began its rate-cutting cycle in September 2024.

Federal Reserve Governor Christopher Waller backed further interest-rate cuts to get the central bank’s setting back to neutral, while saying policymakers need not rush to do so.

If the Fed holds interest rates steady as a means of protecting against inflation, it risks a deeper slowdown of the labor market. On the other hand, by lowering rates to stimulate hiring, the Fed threatens to boost spending and worsen inflation.

Learn what the stated annual interest rate is and how to calculate it without compounding, plus how it compares to the effective annual rate.

A drop in the inflation rate could prove to be good news for homebuyers and owners hoping to refinance. Here's why.