Sell-side Views Post BoK

J.P. Morgan saw hawkish undertones in yesterday's BoK outcome, although sitll expects the central bank to remain on hold in 2023. Goldman's looks for cuts in Q4 of this year.

• J.P. Morgan: "....We continue to expect that the BoK will patiently wait for the impact of restrictive policy stance to stabilize inflation by standing pat at 3.5% at least through 2023. While the timing of the next move is fluid depending on the degree of disinflation, we expect the BoK to stay at 3.5% until the end of 1Q24 before initiating a rate normalization cycle (returning to a broadly-neutral stance) in 2Q24.
  
  The risk scenarios may include (1) (hawkish direction) persistently strong domestic core inflation pressures along with continuation of hike cycles in major DM central banks, or (2) (dovish direction) sudden breakdown of the domestic inflation trend, possibly with a shock to domestic demand conditions and/or with financial stability concerns. That said, given the slow-moving nature of the core (service) price trend, the risk bias looks still tilted to the hawkish direction instead of the dovish direction."
• 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 forward-looking section of the statement was largely unchanged. The central bank lowered its 2023 growth forecasts by 20bp to 1.4% while keeping its headline inflation forecast unchanged at 3.5%. During the press conference, the Governor reiterated the retention of optionality for a hike, highlighting that all MPC members were open to considering additional rate hikes should inflation overshoot BOK forecasts and the Fed become hawkish. We maintain our view that macro and policy developments, as envisaged in our baseline scenario, would likely induce the BOK to enter an easing cycle in Q4 after continuing to pause through Q3."