VIEW: Goldman Front-Load Hikes Slightly, But View 50bp Steps As Unlikely

Goldman Sachs note that “following a recent hawkish remark by the new central bank governor, markets have priced in risks of rapid acceleration in policy rate hikes, as much as a total of 175bp increases, to 3.25% by early 2023. In light of the central bank's focus on near-term inflation prints, we expect the BoK to front-load hikes slightly, with a 25bp hike each in May, July, and October, with the terminal rate at 2.5%, which we continue to expect to be reached around mid-2023. We nonetheless do not expect monetary policy normalization in Korea to proceed in big steps, given: (a) predominantly external yet recently fading inflation pressures; (b) strong headwinds to growth; and (c) vulnerability of the economy to sudden rises in borrowing costs.”