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MNI BoK Preview - January 2023: 25bps Hike; Then Pause

BOK
  • Tomorrow the BoK is expected to deliver a 25bps hike, which would take the policy rate to 3.50%. This isn’t a uniform expectation with 5 out of 16 economists surveyed by Bloomberg forecasting no change, while the remainder are forecasting a 25bps hike. Our base case is for a 25bps hike and then a pause by the BoK.
  • Tightening that has already taken place since 2021, along with signs of softer growth conditions across the domestic and external sectors, coupled with peaking headline inflation, are all factors arguing for a pause. Much stronger won FX levels compared to last early Q4 lows also argues, at the margins, for less aggressive monetary policy action.
  • Sticky core inflation, which remains well above the target, is a powerful offset though and BoK's clear focus remains on bringing inflation back down. If the BoK hikes we expect the Governor will give hints of a pause to assess the impact of previous tightenings and success in bringing inflation back to target.
  • See the full preview here:
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