South Korea: BoK forecast to hike rates in July – UOB

Economist at UOB Group Ho Woei Chen, CFA, comments on the probable further tightening by the BoK in the next month.

Key Takeaways

“South Korea’s headline inflation is at a fresh 14-year high and more than double of the Bank of Korea’s (BOK) 2% target for three consecutive months. Core inflation (excluding agricultural products & oils) is above 4% for the first time since May 2009. The strong sequential gains suggest that the inflation risk remains to the upside.”

“This puts the BOK on track to continue raising interest rates and we reiterate our forecast for the central bank to hike by 25 bps at each of the three subsequent meetings in Jul, Aug and Oct before stopping at its last meeting this year in Nov.”

“The outlook for South Korea’s economy continues to be fortified by optimism from easing COVID restrictions, fiscal expansion and strong exports.”