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MNI BoK Preview - August 2022: Back To A 25bps Hike Pace

BOK

EXECUTIVE SUMMARY

  • A 25bps hike is our base case and 16 out of 17 surveyed economists by Bloomberg expect such a move, with one forecasting a 50bps hike. A Reuters survey paints a similar picture. A 25bps move would take the policy rate to 2.50%, which would be fresh highs back to mid-2014. This also comes after last month’s ‘out-sized’ 50bps hike.
  • Since the last policy meeting in mid-July, inflation data continue to show firm upside pressure, although the pace of upside surprises has eased somewhat. There is little doubt the BoK will also raise its 2022 inflation forecast. The rough consensus looks for this to rise to the low to mid 5% range. One encouraging piece of news from yesterday’s consumer sentiment report, besides the fact that headline sentiment rose, was that household expectations for inflation eased back to 4.3% from 4.7% in July.
  • Such a backdrop tilts the risks towards a 25bps hike at tomorrow’s meeting. This also appears to be the stated preference of the BoK. Recall after the last policy meeting Governor Rhee stated that 25bps increments would be the desired pace going forward, although larger moves weren't ruled out.
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