VIEW: UOB Lift Terminal Rate View To 2.50%

In the wake of yesterday’s BoK decision UOB note that “the key takeaway from the revisions to the growth and inflation forecasts, as well as comments from the BoK, is that inflation is a much bigger concern than growth risks in the near-term. Governor Rhee was explicit on the need to tighten monetary policy further and to get real interest rates to a neutral level. Given the persistent upside risks to inflation, we are raising our call for BoK tightening as we now expect the central bank to hike by 25bp at each of the three subsequent meetings in Jul, Aug and Oct before stopping at its last meeting this year in Nov. This will bring the benchmark rate to 2.50% by end-2022 (vs. our previous forecast of 2.00%). We believe the BoK will stay on hold thereafter as inflation starts to moderate.”