Further Tightening Inbound

The BoK statement confirmed the need for continued rate hikes, although it reiterated a data-dependent stance when it came to the degree of further tightening required, focused on the inflation & growth mix, in addition to financial stability issues including international capital flows, monetary policy in the international arena and geopolitical risks (these factors were all flagged in August).

• The Bank pointed to a ’22 GDP growth path that is generally in line with its previously outlined 2.6% projection, while noting that the inflation trajectory largely matches its existing ’22 CPI forecast of 5.2%, albeit with upside risks noted and a reaffirmation of the idea that inflation will remain in the high 5-6% range for a “considerable time,” as the “impact of the rising Korean won to US dollar exchange rate acts as additional inflationary pressure.”
• Further out, the Bank flagged ’23 GDP growth that was somewhat below its prior forecast (2.1%)
• The Bank also noted that house prices have fallen, household debt has decreased and export growth has slowed.