Barclays note that "headline CPI came in......>

KOREA: Barclays note that "headline CPI came in flat in June, much weaker than

consensus exp. The print marked the second consecutive downside surprise,

despite higher fuel costs & a year-earlier low base. More worryingly, core CPI

slowed to the lowest since Jan '18 when core inflation was 1.06% due to

administered distortions. Underlying inflation (ex food & items subject to gov't

influence) fell sharply in June, underscoring the issue of weak domestic demand.

We cut our 2018 CPI headline and core inflation forecasts by 10bp, to 1.6% &

1.5%, respectively. Even though we still expect headline inflation to return to

2% in Q4 2018, we acknowledge this could take longer. Our forecast trajectory

shows headline inflation averaging 1.5% & 2.1% in Q3 & Q4 18. We think today's

release also virtually eliminates the possibility of a July or August rate hike.

Moreover, the weak print also reduces the possibility of dissenting votes, in

our view. While we still expect the BoK to deliver a 25bp rate hike in Q4 18 on

financial stability concerns & inflation returning to target, we see risks that

it may not be able to hike in '18, if domestic demand conditions & the labour

mkt fail to improve meaningfully in the coming month."