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Statement Focused On Inflation Over Growth

BOK

The BoK's post-meeting statement puts more emphasis on inflation for the foreseeable future. This suggests more tightening is coming, with the question being how aggressive the BoK will be, i.e. will they step up with a 50bps hike.

  • The BoK statement made the following comments around inflation. "Looking ahead, it is forecast that consumer price inflation will remain high in the 5% range for some time, and run at the mid-4% level for the year overall, substantially above the February forecast of 3.1%. Core inflation is forecast to rise to the lower-3% level for the year overall."
  • It also noted "The Board sees it as warranted to conduct monetary policy with more emphasis on inflation for some time, as the Korean economy is expected to continue its recovery and inflation to run above the target level for a considerable time, despite underlying uncertainties in domestic and external conditions."
  • On growth, the economic recovery is expected to continue, albeit with a lower growth trajectory expected compared to earlier in the year (upper 2% level, compared to the February 3% projection). A further recovery in domestic consumption, underpinned by the tight labor market, is expected to offset slower export growth.
  • The upcoming press conference with new BoK Governor Rhee will be the next point of interest, with the Governor likely to be asked how aggressive rate hikes can be. Earlier in the month Governor Rhee stated a more aggressive pace of tightening can't be ruled out.
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    The BoK's post-meeting statement puts more emphasis on inflation for the foreseeable future. This suggests more tightening is coming, with the question being how aggressive the BoK will be, i.e. will they step up with a 50bps hike.

  • The BoK statement made the following comments around inflation. "Looking ahead, it is forecast that consumer price inflation will remain high in the 5% range for some time, and run at the mid-4% level for the year overall, substantially above the February forecast of 3.1%. Core inflation is forecast to rise to the lower-3% level for the year overall."
  • It also noted "The Board sees it as warranted to conduct monetary policy with more emphasis on inflation for some time, as the Korean economy is expected to continue its recovery and inflation to run above the target level for a considerable time, despite underlying uncertainties in domestic and external conditions."
  • On growth, the economic recovery is expected to continue, albeit with a lower growth trajectory expected compared to earlier in the year (upper 2% level, compared to the February 3% projection). A further recovery in domestic consumption, underpinned by the tight labor market, is expected to offset slower export growth.
  • The upcoming press conference with new BoK Governor Rhee will be the next point of interest, with the Governor likely to be asked how aggressive rate hikes can be. Earlier in the month Governor Rhee stated a more aggressive pace of tightening can't be ruled out.