South Korea: BoK paused its tightening cycle in April – UOB

Economist at UOB Group Ho Woei Chen reviews the latest monetary policy meeting by the Bank of Korea (BoK).

Key Takeaways

“In line with consensus expectation, BOK maintained its rate pause in Apr as it kept its benchmark 7-day repo rate unchanged at 3.50% for the second consecutive month. The rate decision was unanimous unlike the previous meeting in Feb when one policy board member voted for a 25bps hike.”

“Similar to the Feb meeting, five board members continue to see the terminal interest rate at 3.75% while one member sees it more favourable for the terminal rate to be at the current 3.50%.”

“However, the case for a further rate hike has weakened and we continue to expect the BOK to remain on hold at 3.50% for the rest of 2023.”

“The BOK signals that there may be scope to further downgrade its growth forecast of 1.6% for this year (reviewed in Feb). It sees 2023 headline inflation to be consistent with the Feb forecast of 3.5% but core inflation may turn out to be higher than the Feb forecast of 3.0% and is expected at a level close to 3.0% by year-end.”