Lee Non-Committal In Final BoK Meeting, Even As Inflation Broadens

Reference to the downside economic risk posed by the Ukraine situation and recognition that today’s decision to leave the policy rate steady was unanimous provided a dovish start to Lee’s final post-decision press conference as BoK Governor, with the Bank seemingly wanting to promote a smooth handover to Lee’s successor (his term finishes in March).

• After that, Lee pointed to no real difference between the BoK and market views re: rates and a need to monitor the impact of fiscal support on inflation. He also flagged the Ukraine situation as a notable upside risk when it comes to inflation, with broadening price pressures already apparent in Korea (fuelled by both demand- and supply-side issues), in lieu of the BoK’s mark up of its inflation projections.
• On the prospect of future rate hikes, Lee noted that one further 25bp move would not be considered tightening, but a continued removal of accommodation. He also suggested that adjustment to the level of policy accommodation should continue.
• Still, it seems that he didn’t want to commit to giving his view on the timing of future moves, given the fact that this was his final monetary policy meeting atop the BoK. He pointed to a need to minimise any gaps in BoK leadership, while refusing to give any indications re: his preferences when it comes to a successor.
• Ultimately, it would seem that the end of Lee’s term made for fairly limited forward guidance from the Bank and may have even resulted in a lack of hawkish voting dissent from within the ranks of the board, given the impending changeover in Bank leadership. We suggested this may be the case ahead of the decision.