VIEW: BofA Look For A 50bp Hike Next Week

Bank of America note that “inflationary pressure is tenaciously persisting in Korea. The latest CPI inflation print for June climbed to a 23-year high of 6.0% Y/Y. Consumers' inflation expectations reached a 10-year high of 3.9% vs target of 2.0%. against this backdrop, we believe the Bank of Korea (BoK) is prompted to send a strong signal against the price shock next week with a big-step hike. We expect Korea's policy rate to reach 2.25% on 13 July with this extraordinary move, the first 50bp-hike since 1998. We believe this decision will demonstrate local policymakers' sense of urgency and strong commitment to tame rapidly rising inflation and anchor inflation expectations back to target level. We expect four more 25bp hikes through Jan 2023 with terminal at 3.25%. However, given growth concerns later next year, we pencil in rate cuts in 2024.”