VIEW: Societe Generale Expect A 50bp Hike In July & A Terminal Rate Of 3.0%

Societe Generale note that “the BoK is likely to hike rates by 50bp to 2.25% at its policy meeting on 13 July. Inflation worries have significantly increased after the headline print hit a 24-year high of 6.0% and survey-based expected inflations rose to a 10-year high of 3.9%. The sustained tightening of labour market conditions also argues for aggressive monetary tightening, while policymakers are expected to downplay the mixed signals emanating from the activity indicators. The Fed's large 75bp rate hike in June should also affect the BoK's policy decision. We now expect a terminal BoK policy rate of 3.0% vs our previous forecast of 2.5%. We foresee 25bp hikes at each of the three remaining meetings this year (August, October and November). We believe that the likely peak of headline inflation in Q422 will lead to the end of the BoK's hiking cycle given rising concerns over the growth outlook among policymakers and market participants.”