Sell-Side Updates Post BoK's On Hold Outcome

Sell-side views are broadly unchanged after BoK's hawkish hold yesterday. Rates are expected to remain on hold for the remainder of the year. Cuts are expected in 2024, although there is some uncertainty how early in 2024 the easing cycle commences.

• J.P. Morgan: "In all, macroeconomic benefits from maintaining the restrictive stance seem to outweigh the potential costs or risks of over-tightening at the current juncture, and we expect that the policy rate will be maintained at 3.5% for more months (at least by 1Q24). In terms of risk profile, the hawkish post-MPC communication suggests a risk of delayed policy pivot than our baseline expectation (first cut action at 2Q24). Yet at the same time, the BoK seems not to consider a policy rate hike action in the near term as it prefers a fine-tuned (or micro-level) policy reaction to the household leverage issue."
• Goldman Sachs: "The Bank of Korea's MPC kept its policy rate on hold at 3.5%, as expected. This decision was unanimous, unchanged from the previous meeting. The BOK also kept its near-term growth and inflation forecast unchanged. We continue to expect the BOK to begin a gradual easing cycle in Q1, 2024 under our baseline macro forecasts and our US team's views of the start of Fed easing in Q2, 2024."
  ANZ: "For our part, we maintain our call for the BoK to keep its policy rate unchanged for the rest of the year. We remain of the view that we will have to wait until 2024 to be more confident both headline and core inflation in South Korea are likely to sustainably return to the 2% range and for signs of a US Fed policy pivot. It will also take time for the turnaround in South Korea’s basic balance of payment position to gather steam and allow the BoK more flexibility to prioritise domestic conditions in its monetary policy settings."