VIEW: ING: Uncertainty On Future Inflation Is Growing

ING note that “as pipeline prices and inflation expectations have eased, the Bank of Korea returned to its normal 25bp pace of hiking today. Meanwhile, the recent surge in fresh food prices and the weak KRW are two major factors challenging the Bank of Korea’s efforts to tame inflation.”

• “At the press conference, Governor Rhee emphasized once again that the inflation-oriented policy will continue as long as inflation remains above 5%. If CPI inflation doesn’t moderate by October (we expect the BoK to deliver another 25bp hike in October) and the KRW continues to weaken, then the possibility of an additional 25bp hike in November will grow.”
• “The BoK has also revised its inflation forecasts up to 5.2% (vs 4.5%) for 2022 and to 3.7% (vs 2.9%) for 2023. As next year's inflation is expected to exceed the Bank of Korea's inflation target of 2%, this opens up the possibility that interest rates may continue to rise next year if the forecast is correct.”