Unanimous forecasts point to Bank of Korea rate hike today as won weakness bites
Unanimity across forecasters suggests the hike itself is fully priced, meaning the real market focus will be on the tone of the governor's guidance, particularly any signal on the pace and timing of further tightening. With the won under depreciation pressure and inflation above target, analysts see room for the central bank to reinforce a hawkish stance without necessarily committing to a fixed rate path. FX markets may react more to comments on currency weakness than to the hike itself, given several analysts flagged guidance as the more important variable this time around.
--- Economists are unanimous that the Bank of Korea will hike rates by 25bp Thursday, with attention now shifting to how hawkish the governor's guidance turns out to be.
Summary:
- All 10 firms surveyed expect a 25bp hike from the Bank of Korea at Thursday's meeting
- A Reuters survey found 28 of 31 economists expect the policy rate to reach 3.00% by year-end
- HSBC cited won depreciation pressure, firm core inflation and an improved growth outlook in backing a hike
- Citigroup expects the governor to signal quarterly 25bp hikes in the second half of the year, with further moves projected in July, October, January and April
- Other analysts pointed to a broadly hawkish tone at the meeting, with views mixed on whether the BOK will hike again as soon as October or wait to avoid overly precise forward guidance
- Some analysts noted the governor's own signalling has left policy objectives unusually aligned toward tightening, with persistent above-target inflation and currency weakness cited as key drivers
The Bank of Korea is unanimously expected to raise its policy rate by 25 basis points at Thursday's meeting, according to a roundup of institutional forecasts. All 10 firms surveyed see a hike as the outcome, with a separate Reuters poll finding 28 of 31 economists expect the policy rate to reach 3.00% by the end of the year.
HSBC pointed to won depreciation pressure, firm core inflation and an improved growth outlook as reasons behind its call for a hike, while other analysts noted the governor has already signalled that policy objectives are unusually aligned toward tightening. Persistent inflation above target and continued won weakness, which raises the risk of imported inflation, were cited repeatedly as key drivers behind the expected move.
With the hike itself broadly priced in, several analysts said the more important signal will be the tone of the governor's guidance rather than the decision itself, given the central bank's focus on managing currency weakness. Citigroup expects the governor to signal a pace of quarterly 25 basis point hikes through the second half of the year, projecting additional increases in July and October this year, followed by further hikes in January and April next year.
Views differ on the near-term path beyond Thursday's move. Some analysts expect the central bank to follow with a second hike as soon as October rather than move in consecutive months, while others expect the bank to avoid laying out a precise forward timetable altogether, wary of the side effects of overly specific guidance. A hawkish overall tone is widely expected, with attention likely to fall on any revisions to growth forecasts and commentary on the pace of future tightening. Some analysts also flagged that easing oil prices and the timing of official forecasts, not due until August, could push a further move out toward October rather than sooner.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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