The BOK board declined to offer any hint of rate cuts following Friday's decision to hold the policy rate at 3.5%.
“The Board will continue to conduct monetary policy in order to stabilise consumer price inflation at the target level over the medium-term horizon as it monitors economic growth, while paying attention to financial stability,” the BOK said in a statement.
STICKY INFLATION
CPI rose 3.1% y/y in March, unchanged from 3.1% in February. (See chart) Prices for crude oil-linked goods rose 1.2% for the first y/y rise since January 2023.
Governor Rhee noted CPI will likely lower gradually, but heightened uncertainty over the inflation outlook existed thanks to geopolitical risk in the Middle East, movement in global oil prices and trends in agricultural product prices.
The BOK warned CPI had remained flat at 3.1% in March due to increases in agricultural product and global oil prices. Short-term inflation expectations among the general public have also risen to 3.2%, the Bank noted.
“Looking ahead, it is forecast that core inflation will continue its slowing trend, which is consistent with the path projected in February, and it is likely to slow to the 2% level at the end of the year,” the BOK explained.
The bank expects domestic economic growth to continue improving, mainly driven by exports. (See chart)
“Going forward, export growth is likely to increase greater than expected, supported by buoyancy in the IT industry, amid a modest recovery in consumption," the BOK explained, adding GDP growth in 2024 will likely fall in line with, or higher than the February forecast of 2.1%.
The board will next meet May 23.