Staying Restrictive Long Enough To Bring Inflation Back Towards Target

The BoK statement presents a fairly evenly balanced outlook as we progress into 2024. The central bank has left the door ajar for a further tightening, although the bar for such a move is likely to remain fairly high.

• Whilst inflation forecasts for this year and next were nudged higher, the BoK still sees the general trajectory of inflation as skewed to the downside. "...inflation is projected to maintain its underlying slowing trend owing to the weakening of demand-side pressures and to declines in the prices of global oil and agricultural products."
• On growth, "domestic economic growth is expected to maintain its improving trends with an ongoing recovery in exports." It was also noted the pace of the consumption recovery is slow, while the outlook has a high degree of uncertainty. There are also high uncertainties regarding household debt and external conditions.
• Equally though the central bank stated "will maintain a restrictive policy stance for a sufficiently long period of time until the Board is confident that inflation will converge on the target level."
• Hence a near term policy pivot in the first stages of 2024 is unlikely.