MNI BoK Preview - April 2023: No Change Likely

EXECUTIVE SUMMARY

• The majority of forecasters expect the BoK to leave rates on hold, at 3.50%, at Tuesday’s policy meetings. This is also our bias. The BoK is likely to take some comfort from the continued move down in headline inflation pressures. Since the last policy meeting in late February, y/y CPI momentum has eased back to 4.2%. This is well off recent cyclical highs of 6.3%, which printed in July 2022. Like some other parts of the region, core inflation pressures remain sticky though. The core y/y print held steady at 4.8% in March, only down a touch from January cyclical highs at 5.0%.
• Outside of inflation dynamics, offshore developments have turned more dovish since the last BoK policy meeting. Whilst risks around the global banking sector appear to have subsided, the impact from turmoil in the sector on broader economic conditions (lending etc in the US economy) are yet to be fully felt. The past week has also delivered some notable downside surprises in terms of US ISM prints. There have been tentative signs of some improvement in domestic sentiment indicators. Still outright levels for these surveys remain fairly depressed relative to average 2021/2022 levels.
• Such a backdrop, coupled with signs of easing headline inflation pressures, should leave the BoK comfortable to hold steady from a policy stand point.
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BoK Preview - April 2023.pdf