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What Is The Sell-Side Looking For From The BoK Post-CPI?

BOK

A quick summary of sell-side BoK calls after yesterday’s CPI print:

  • Goldman Sachs: While the acceleration in headline inflation might prompt some MPC members to lean towards a 50bp hike in July, we maintain our baseline forecast of a 25bp hike in the July 13 meeting. Recent communication from policymakers, including from an inter-ministerial meeting which Finance minister and BoK governor attended, suggests that they would prefer keeping optionality in the pace and extent of monetary tightening, given rising downside risks to global growth and potentially large negative side effects of rapid policy rate hikes on domestic demand and financial stability. We continue to expect the BoK to raise its policy rate to a peak of 2.75% at 25bp increments in the remaining four meetings in 2022.
  • ING: Based on recently released data, we expect the BoK to deliver a 50bp hike in July, and then to revert to 25bp hikes in August and October. We still think that a total of 100bp of increases could stabilize inflation by the year-end. But, as tightening monetary conditions both home and abroad negatively impact next year’s growth, we expect the BoK will enter an easing cycle by the end of 2023.
  • J.P.Morgan: Looking forward, we expect Y/Y inflation to remain above 6% through the end of ‘22 and rise temporarily above 7% in early Q4, based on the assumption that core prices’ sequential trend growth should remain elevated above 4% annualized pace in the coming months, and imported raw material prices (including crude oil prices) M/M gains should stabilize in the coming months. In the medium term, we expect both core and headline prices to stabilize by end-2023. In terms of policy implications, we already incorporated the upward trend of inflation in our Bank of Korea policy forecast, with a 50bp hike in July followed by a 25bp hike in consecutive meetings by January 2023 to 3.25%. We maintain our previous call for BoK policy response next week (50bp hike), looking for hints on forward guidance in post-MPC communications.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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