Maintaining A Restrictive Stance For A Considerable Time

The BoK statement continued to push back against any near term notion of rate cuts. The central bank stated that: "The Board, therefore, will maintain a restrictive policy stance for a considerable time with an emphasis on ensuring price stability." In assessing whether to tighten rates further, the board will consider the pace of the inflation slowdown, financial stability risks, the impact of previous tightening's, and the monetary policy changes in major economies.

• In terms of the inflation backdrop, the board noted evolution of headline inflation is consistent with the May forecast of 3.5%. However, core inflation is set to be slightly higher than the 3.3% forecast. The central bank stated that "Although inflation has slowed, it is forecast to pick up again to around the 3% level since August and to remain above the target level for a considerable time."
• On the economy, the domestic backdrop has improved somewhat, but the recovery is expected to be gradual. For this year, GDP growth is consistent with the May forecast of 1.4%.
• The global economy has proven more resilient than expected, but is still expected to slow gradually.