ING’s Min Joo Kang expects the Bank of Korea (BoK) to stay focused on inflation stabilisation and financial stability as resilient growth combines with rising price pressures. She forecasts CPI at 2.5% YoY in March, above consensus, and projects that higher energy prices and fiscal measures will keep inflation risks tilted to the upside, warranting a 25bp hike in July.
Resilient activity delays policy easing
“We expect CPI inflation to rise to 2.5% YoY, slightly above the market consensus of 2.3%. Despite the government fuel price cap and a further fuel tax cut, petrol prices are expected to rise, while the recent sharp rise in import prices is expected to add pressure on broad goods prices.”
“Higher energy prices for longer and supplementary budget measures could increase upward inflation risks in coming months.”
“If we are right about the resilience of the economy and a higher-inflation path, then the Bank of Korea’s policy focus will be on inflation stabilisation and financial stability.”
“We expect the Bank of Korea to deliver a 25bp hike in July under the new governor, Shin Hyun Song.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
