South Korea: Extra rate hikes remain on the cards – UOB
|Economist at UOB Group Ho Woei Chen, CFA, reviews the latest BoK monetary policy meeting.
Key Takeaways
“In line with market consensus, the Bank of Korea (BOK) raised its benchmark base rate by 25 bps to 1.25% ... This is the third rate increase in four meetings since Aug 2021 and has restored the interest rate to its level before the pandemic. Governor Lee Ju-yeol said the current policy rate is still below the neutral level and signaled that the BOK may raise the benchmark rate beyond 1.50%.”
“The BOK upped its inflation outlook for 2022 and now sees it “above the mid-2% level” compared to its Nov’s forecast of 2.0%. With pressure from commodity, housing and food prices, we have therefore raised our inflation forecast for 2022 to 2.6% from 2.0%.”
“The next meeting will be on 24 Feb which we expect the BOK to stay put. Thereafter, we expect another 50 bps interest rate hike this year given the hawkish posturing, likely with 25 bps each in 2Q and 3Q. Governor Lee’s second term will end on 31 Mar but his successor may be confirmed only after the new government comes into power in May following the presidential election on 9 Mar. This increases the uncertainty of the next rate hike timing.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.