VIEW: Goldman Sachs Roll Forward Liftoff Call

Goldman Sachs have bought forward their expected "timing of policy rate liftoff for Korea to this November. With the earlier liftoff and ensuing hikes, we forecast that policy rate reaches 1.25% by end-2022. Our revised view primarily reflects the improvement in growth outlook on robust tech demand, as illustrated by a severe chip shortage. Growth will likely remain solid this year on strong exports and capex, given the large and thriving chip industry, notwithstanding risks related to the pandemic outlook. We edge up our 2021 real GDP growth forecast slightly to 4.5% and our forecast for 2022 by 70bp to 3.3%, compared with consensus forecast of 4.0% and 3.1% respectively, mostly on investment pickup, notably chip capacity and R&D. We maintain our view that inflation will rise this year on commodity and base effects but will peak in Q2 on decelerating commodity prices and easing supply constraints. We expect headline inflation to decelerate to 1.7% next year from 1.9% this year. Our inflation forecasts are slightly above consensus. Financial stability goals are also likely to support policy rate liftoff sooner rather than later. High household debt (over 100% of GDP) remains a main policy concern. Its recent acceleration to 12% growth, the fastest since 2015, with a likely shift in the policy focus from demand restrictions to supply measures, could support an earlier start of a gradual precautionary normalization in monetary policy."