Bank of Korea Watch Higher numbers, lingering uncertainty

Research evidence excerpt

Bank of Korea Watch Higher numbers, lingering uncertainty

22 May 2026

Economics

Korea Bank of Korea Watch

Higher numbers, lingering uncertainty

◆ We expect the BoK to keep its policy rate on hold at 2.50% Jin Choi

on 28 May, despite a hawkish tilt in its guidance Economist, Korea & Taiwan

The Hongkong and Shanghai Banking Corporation Limited

jin.h.j.choi@hsbc.com.hk

◆ Near-term CPI risks are higher, yet core/breadth still looks +852 2996 6597

contained; watch 2027 forecasts for policy implications

◆ Risks to our view include global energy prices, major central

banks’ reactions, and domestic consumption strength

Call: Hold, but the risk distribution shifts hawkish: We expect the Board to keep

the policy rate unchanged at 2.50%, while leaning more hawkish in its

communication. Upside risks to growth and inflation have risen, so the Board is likely

to signal greater readiness to tighten if needed, while continuing to stress

conditionality and data dependence.

Inflation: Higher near-term path, limited evidence of persistence: We now see a

higher oil price trajectory as our base case and a more gradual KRW recovery, lifting

the near-term inflation profile. That said, we’re not convinced the current acceleration

will prove persistent: core/breadth indicators and inflation expectations still suggest

limited second-round pass-through, and policy support (including scope to extend

fuel price cuts) could help cap the retail energy impulse.

Forecasts: 2027/core matters more than the near-term upgrade: While the BoK is

likely to revise up its 2026 GDP/CPI forecasts, the more decision-relevant signal is how it

treats 2027 inflation and core inflation. A restrained 2027 CPI profile would support the