Korea Watch: BoK Preview: 25bp July hike on the table, forward guidance key to watch

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Korea Watch: BoK Preview: 25bp July hike on the table, forward guidance key to watch

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Korea Watch

BoK Preview: 25bp July hike on the table,

forward guidance key to watch

FX stability takes center stage 09 July 2026

We expect the BoK to raise the base rate by 25bp at the July 16 MPB meeting, marking GEM Economics

the start of a gradual hiking cycle. Since the May meeting, USDKRW has remained Asia | Korea

entrenched around 1,500–1,550 and briefly touched a 17-year low, despite intensified Benson Wu, CFA

verbal intervention. Meanwhile, sizeable foreign equity outflows amid rebalancing needs China & Korea Economist

for global equity investors have emerged as a new source of exchange-rate volatility. Merrill+852 3508Lynch5047(Hong Kong)

Against this backdrop, policymakers are likely to place greater emphasis on exchange- benson.wu@bofa.com

rate stability and its implications for inflation and financial conditions. Ting Him Ho, CFA

Asia Economist

Inflation to continue above target Merrill+852 3508Lynch8744(Hong Kong)

tinghim.ho@bofa.com

Headline CPI rose to 3.2% yoy in June, the highest reading since late 2023, while core

inflation remained unchanged at 2.5%. Although easing Middle East tensions should

reduce the direct contribution from fuel prices, the pass-through from a persistently Abbreviations:

weak won is likely to keep headline inflation close to 3% in the near term. More

importantly, the BoK's latest inflation assessment highlighted concerns that underlying BoK: Bank of Korea

inflation is becoming increasingly persistent and domestically driven, reinforcing the

MPB: Monetary Policy Boardcase for further policy normalization.

Ytd: year-to-date

Domestic financial stability risks reinforce a hawkish bias