VIEW: ING: Sticking With Base Case, For Now

In the wake of yesterday’s BoK decision ING note that “the market has been rapidly pricing in July and August rate hikes, and an additional hike in the fourth quarter. However, we’d like to check a few data points before we revise our BoK call - a 25bp hike each in July and November. First, CPI outcomes in May and June should be key to watch, and second, whether household credit growth will slow down. In fact, household credit growth slowed rapidly in Q122 mainly due to tight lending conditions. This is a key indicator that the BoK has been paying attention to while repeatedly expressing concerns about the fast pace of household leveraging. Although the government eased lending standards from Q2, and thus credit growth reaccelerated again after April, the rebound is expected to be limited as the debt service burden for lenders increases. We think that even if CPI remains at an elevated level by the end of this year, the supply components of CPI stabilise then the BoK will slow its rate hike pace.”