Governor Rhee - Don't Rule Out Another Rate Hike

Governor Rhee's press conference has left hawkish tones, similar to the policy statement. Notably the governor stated that six members of the board were open to a 3.75% policy rate. In April, 5 members were open to the idea of higher rates, so this is a slight step up from that standpoint. The key reason for this was the longer than expected move lower in core inflation (with forecasts nudged up for 2023 to 3.3% from 3.0%).

• Note also, this was the first board meeting for two new board members, Park Chunsup and Chang Yongsung.
• Governor Rhee also stated that it will take considerable time to reach the 2% inflation target. Any talk of rate cuts is too early until such a time, which is similar to what Rhee has stated in the past. Whilst Rhee also noted the market should not think the BoK will not hike rates again.
• He added rate cut would also create financial instability risks. He stated FX intervention is not targeted at a specific level.
• On the growth downgrade, Rhee stated that the uneven recovery from China was an issue, along with on-going weakness in exports/investment. He stated that the chip sector is expected to trough in Q4.
• There is more uncertainty surrounding the China recovery, with some upside, as well as downside risks.