MNI BoK Preview - February 2023: A Hawkish Hold

EXECUTIVE SUMMARY

• The BoK faces a delicate balancing act at the current juncture. Inflation pressures have moved off 2022 highs, but remain elevated from an historical standpoint. Inflation expectations have ticked higher over the last few months, although through much of 2021 and 2022 headline inflation led expectations rather than the other way around. While there are some signs of easing services related inflation pressures, the BoK is likely to want to see more evidence of such trends before being more comfortably around the outlook.
• On the growth side, momentum has clearly cooled. External headwinds persist, particularly in the tech space, while domestic demand is showing signs of the cumulative rate hikes over the past 18 months. Such a growth backdrop warrants caution in terms of additional rate hikes.
• Fed developments have also turned more hawkish since January, which has helped push USD/KRW back above 1300, some 7% above early February lows. This is also likely to bias the BoK away from sounding too dovish, at the margins.
• See the full preview here:

BoK Preview - February 2023.pdf