A Rate Cut In H1 Unlikely, May Data Key For Rate Cut View In H2

*Corrected first paragraph
The BoK held policy rates steady at 3.50%, as widely expected. The central bank also kept its 2024 and 2025 inflation and GDP forecasts unchanged (relative to the Nov BoK update, mostly in the 2-2.5% range for both series). The 2024 core inflation forecast is projected to be slightly below the Nov estimate.

• The decision to hold rates steady was unanimous. 5 out of 6 board members saw the policy rate at 3.50% in 3 months time, while one board member was open to a cut. This reflected a weaker consumption backdrop.
• Governor Rhee stated that a rate cut was unlikely in the first half. A rate in H2 would be dependent upon economic data outcomes in May. Note we get Apr CPI on May 2, which will likely be a key input to the second half outlook. The BoK meeting in May is on the 23rd.
• The April inflation period may be a key reference point as Governor Rhee stated that near term inflation may pick up before trending down again. Presumably by the April print we should know if this trend is correct, which in turn may pave the way for easier policy settings in H2.
• The BoK statement and the Governor reiterated that policy would be held restrictive long enough to ensure a return to the inflation target. The BoK stated it was premature to be confident that inflation will return to the target level.
• The market reaction today's announcement hasn't been large. A second half easing does align with the rough sell-side consensus.