Economist at UOB Group Ho Woei Chen, CFA, reviews the latest interest rate decision by the BoK.
Key Takeaways
“In line with market consensus, the Bank of Korea (BOK) kept its benchmark base rate unchanged at 1.25% at its Feb meeting.”
“The BOK officially raised its 2022 inflation forecast to 3.1% from 2.0% after warning in Jan that inflation could exceed the path projected in Nov 2021. The sharply higher inflation outlook underpins expectation that the BOK will resume its rate normalisation in Apr/May.”
“After three rate hikes, we think the BOK can afford to wait and see how other global central banks respond to the Russia-Ukraine crisis and the impact on already high energy prices while also assessing the risks from record high COVID-19 infections at home. Nevertheless, based on expectation of a higher inflation trajectory this year, we maintain our forecast for another 50 bps interest rate hike, likely with 25 bps each in 2Q and 3Q to bring the base rate to 1.75% by end-2022.”
