An inflation gauge tracked by the Bank of Japan just jumped to a seven-month high

An inflation gauge in Japan that is closely watched by the Bank of Japan (BOJ) came in at a seven-month high in November, which could prompt the central bank to raise rates early next year.

The so-called “core-core” inflation rate, which strips out prices of both fresh food and energy and is tracked by the BOJ, rose to 2.4% from 2.3%, its highest level since April.

The core inflation rate — which strips out prices of fresh food — came in at 2.7%, up from the 2.3% seen in October and beating the 2.6% forecast by economists polled by Reuters.

Headline inflation rose to 2.9% from 2.3%, reaching its highest level since August.

The readings come a day after the Bank of Japan held interest rates steady at 0.25%, surprising economists who expected a 25 basis points hike.

The BOJ said in its statement on Thursday that the decision to hold was a split 8-1 decision, with board member Naoki Tamura advocating for a 25-basis-point hike.

Tamura was of the view that inflation risks had become more skewed to the upside, and proposed that the bank hike interest rates during the meeting.

BOJ Governor Kazuo Ueda reportedly said in a press conference Thursday that as underlying inflation was only increasing at “at a moderate pace,” the BOJ could go slow in raising rates,” he said.

Ueda did add, however, that the central bank was mindful that if it waited too long to raise rates, it would have to quicken rate hikes in future meetings,

The BOJ “will resume its tightening cycle before long,” Marcel Thieliant, head of Asia-Pacific at Capital Economics said in a statement after the decision. Capital Economics expects a hike in January after a new set of economic forecasts come in.

Thieliant added “it’s worth noting that, unlike in October, the decision to leave rates on hold was not unanimous,” pointing at Tamura’s vote to raise rates to 0.5%.