MNI BoK Preview - August 2023: Holding Steady, Staying Restrictive

EXECUTIVE SUMMARY

• The BoK is likely to remain firmly on hold at tomorrow's policy announcement. This will mark the 5th straight meeting that the policy rate has been held at 3.50%.
• Recent inflation trends support the on hold stance, but BoK may be reluctant to get too confident in the outlook, given less favorable base effects in H2 and rising local food and global energy prices. Core prices and inflation expectations are also coming down less quickly compared to headline CPI momentum. The weaker won trend could also bring back firmer imported inflation pressures at some stage, so the central bank may not want to sound too dovish.
• Indeed, it may leave scope for rates to go to 3.75%, to retain a hawkish bias, and push back against the notion of rate cuts in the near term. Equally though the bar for another rate hike is likely to remain fairly high, with policy settings already in restrictive territory.
• See the full preview here:

BoK Preview - August 2023.pdf