Bank Strives For Balance After Delivering Unanimous Hike

The BoK’s post-meeting press conference continued to sound worry re: elevated inflation levels, while pointing to equal focus on GDP growth (likely to be in the mid- to upper-2% range in ’22, per the press conference) and inflation (deemed likely to be around 4% in ’22).

• Interestingly, the board met with Governor-in-waiting Rhee (outside of the normal meeting), although Rhee did not provide his views on monetary policy during the gathering, per interim Governor Joo.
• Meanwhile the fact that the decision to hike the policy rate by 25bp was unanimous will have surprised almost everyone, given the fact that the decision was seen as a close call by the sell-side.
• Joo stressed that the Bank had to act to head off surging inflation, even though the decision came before a new Governor could take the reigns. The fact that consumption is deemed to have recovered quickly from mid-March probably aided the Bank when it came to implementing further tightening.
• While the last couple of points may read hawkishly, Joo was keen to stress that the Bank’s situation is different to that being experienced by the U.S. Fed, with no expectations for a move above neutral when it comes to the policy rate, while the Bank’s tone didn’t point to a need for a swifter/deeper round of tightening in the coming months, even with inflation pushing higher. Joo also tried to play down any worry re: stagflation.
• Elsewhere, the Bank pointed to a continued willingness to deploy bond market stabilisation measures, if required.
• This provided a fairly neutral overall tone to the decision on the whole, with no real change in policy outlook apparent on the part of the BoK. It took its opportunity act, with the fight against inflation deemed more important than any operational issues faced by the proverbial gap at the top of Board’s meeting table.