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MNI BoK Preview - July 2022: A 'Big Step' Rate Hike Of 50bps Expected

BOK

EXECUTIVE SUMMARY

  • A 50bps hike by the BoK seems likely at this Wednesday’s policy meeting. This would take the policy rate to 2.25% from 1.75% currently, which would be the highest level since mid 2014. Such a call is not a uniform consensus among economists surveyed with Bloomberg, with 15 out of 19 expecting a 50bps hike. The remainder expect a more modest move of 25bps.
  • This would be the BoK’s first such 50bps hike, although underlying inflation pressure justify such a move. The June data once again exceeded expectations. The headline printed at 6.0% YoY, while core prices accelerated to 4.4% YoY. The headline is the strongest rate of increase since 1998, while core is running at the firmest pace since early 2009.
  • The weaker won trend also adds to the case for a larger rate hike, albeit at the margin. Higher USD/KRW levels are adding to imported price pressures from rising commodity prices.
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